Luxembourg Election May End Juncker’s Run

The people of Luxembourg went to the polls yesterday in a snap election, and the result may end Jean-Claude Juncker’s 18-year run as prime minister. While the ruling Christian Social People’s Party (CSV) secured the most seats, it lost a few compared with the 2009 election result. That may make it harder for him to put together a majority, and it may encourage the other parties to gang up on him. While Luxembourg is small, it is also quite well-off, and its debt is rated Aaa. The departure of the conservative PM might affect the future of European finance, for the better.

The parliament has 60 seats total, and the CSV secured 23 of them, down three from 2009. The socialists (the coalition partner of the CSV in the outgoing government) and the liberals both won 13 seats — meaning the liberals picked up four. The Greens won 6 seats. If the latter three parties unite, they would have 32 seats, a majority of 4. As the largest party in parliament, the CSV gets to try to form a government first, but the others may play hard to get.

Mr. Juncker is cautious at the moment, “As a party we don’t have a preference as far as the coalition partners are concerned. We do not have exclusive views on that,” Mr Juncker said. Local analysts suggest that his first choice would be the liberals given their solid showing. Those same analysts believe that Xavier Bettel, the 40-year-old liberal leader who is also mayor of Luxembourg city, may choose not to work with the CSV. In a liberal, socialist, Green coalition, he might wind up prime minister.

Mr. Juncker has been in office since 1995, and he handed in his resignation that forced the election after an investigation into the activities of the SREL security agency concluded that he didn’t inform parliament of “irregularities and supposed illegalities.” He denies any wrong doing, but the report covered “illegal bugging of politicians, the purchase of cars for private use and payments in exchange for access to local officials,” according to the BBC.

Perhaps the people of Luxembourg don’t care about that as much as they do the fact that Mr. Juncker has been spending more time in Brussels attending to European affairs than they would like; after all, he led the eurozone’s group of finance ministers during the euro crisis.. There are local issues that he allegedly has ignored like rising exposure to shaky debt and rising unemployment.

If he is out in Luxembourg, he will be out in Brussels. Luxembourg is not a big place, but it is part of the Aaa-rated bloc in Europe, which is led by Angela Merkel’s Germany. If Luxembourg adopts a more lenient view of debts in the periphery and a more reflationary economic policy, the Aaa-bloc might start to fragment. Dr. Merkel, with the German election behind her, might be able to loosen up her tough stance, and all the more so if Luxembourg were to make the first move in that direction.

Here’s hoping anyway.