Your Excellency, the new German Cabinet was sworn in on 28 October. Why did the new German Foreign Minister Guido Westerwelle visit Luxembourg just seven days after taking office?

 “Luxembourg is very dear to our hearts because it’s our neighbour, and because it’s at the heart of Europe. The new Foreign Minister toured all nine of Germany’s neighbouring countries at the beginning of his term. Luxembourg was the fourth, and I would note he visited Luxembourg before the US. That indicates the importance we attach to all our neighbours, especially Luxembourg.

You’ve worked across Europe, the Americas, and Asia. How has that influenced your view of Germany’s place in the world?

 “In all the countries I’ve served, people have considered Germany an attractive place to live, study and work. However, what struck me the most is that quite a lot of people have a good knowledge of developments in my country. For instance, Korea is still a divided country; you could say the last unresolved question of World War II. South Koreans were very well informed about German reunification, and very interested in how we overcame all the problems connected with it.

Germany is Luxembourg’s largest trading partner. Does that set the tone for your relationship?

“If the economic situation in Germany is good, then that’s good for Luxembourg, and vice versa.

More than 37,000 Germans commute into the Grand Duchy each day. What are the challenges with having such a large cross-border workforce?

 “Luxembourg is a job machine. You just have to look at the motorway in the morning. It’s not a paperjam, it’s a traffic jam. The TGV connecting Luxembourg and Paris set a standard. Rail links with Germany have to be improved. It will be expensive, but it’s a necessity. Of course, without the Schengen Agreement all of this would not be possible.

Do you think cooperation in the Greater Region is a model for Europe?

 “Many of the cooperative projects in the Greater Region are models of excellence. For instance, the German-Luxembourgish high school, just across the Mosel River in Perl, was Luxembourg’s first bilateral school and is a model of European cooperation at the roots. The students learn in French, German and Luxembourgish in joint classes. I admire it greatly.There is also excellent cooperation between universities: more than 1,600 young Luxembourgers currently study at German universities. With the Prüm Agreement, police agencies from all four countries in the Greater Region have a coordination office here in Luxembourg.

Last month German Finance Minister Wolfgang Schaeuble and Luxembourg Finance Minister Luc Frieden initialled an agreement on the exchange of tax data. Why is this important?

“Previously some EU countries opted, under EU guidelines, to collect a withholding tax on investmen income and transfer a lump sum back to each country of origin. Luxembourg transferred 60 million euros to Germany per year.The new protocol revises Germany and Luxembourg’s double taxation treaty of 1958. It provides a legal basis for information exchange on the basis of clearly defined requests by authorities in either state, but no ‘fishing expeditions’ are allowed. This is a step forward. We have to look at what can be done further, but for the time being it settles problems we’ve had on this issue.

How well has Luxembourg handled the financial crisis?

 “I would underline the efforts of Prime Minister Jean-Claude Juncker, Luc Frieden and Economy Minister Jeannot Krecké in their approach to settling the financial crisis. In fact, last month Juncker received the “European Banker of the Year” award in Germany from the Group of 20+1. I think that’s quite a compliment.

There are 42 German banks in Luxembourg, nearly one third of the total number. What challenges will they face in 2010?

“Few of the German financial institutions have full decision-making powers. Some outperform branch offices in other countries, yet investment strategy and decisions may be taken by bank headquarters in Germany. So the process of bank restructuring in Germany may also concern banks in Luxembourg. For instance, the state-owned Landesbanken are now concentrating on their core business in

Germany. Selling subsidiaries in Luxembourg is under discussion. It’s a good opportunity to discuss the advantages of Luxembourg in Frankfurt, and other financial centres.

German taxpayers have had to bail out some German banks. Do you think that creates a market distortion?

“The whole world faced a severe, and some say unique, financial crisis. Governments in many countries had to intervene at short notice to prevent collapse. One only has to imagine 1929. A collapse of the world financial system would have had a similar effect to a nuclear bomb. Assistance was not given to please bankers or in any way honour wrongdoing. To prevent the collapse of economies, measures had to be taken. In order to prevent market distortion, EU states agreed that a coordinated exit strategy is needed.

Both the EU and the USA are reforming their financial regulatory regimes. What important concerns are you following on this issue?

 “The shortcomings in the financial sector have to be addressed on a global scale. The G20 has taken responsibility to offer a framework for that. Luc Frieden recently outlined the importance of all EU member states entering into this dialogue with a common position.This G20 process is a fairly new thing. As with every new thing, nothing is perfect. One has to harmonise between the G20 and EU, since not all EU states are present at the G20. With the new European Commission, and the new Permanent President of the Council, Herman van Rompuy, as well as the High Representative of Foreign Affairs, Catherine Ashton, all the correct institutions are in place to start to work on this. An effective global system of regulatory mechanisms is of the utmost importance in preventing the occurrence of another major financial crisis. We see how difficult it is to overcome this crisis. We can’t afford another one.

What can you tell us about the five-point plan that Chancellor Angela Merkel presented to the German Parliament last month?

 “The Government is faced with the effects of the severe economic crisis that struck the world last year. The challenge is to sustain growth within the framework of a social market economy. She outlined the new government’s roadmap in overcoming the effects of the financial crisis, adjusting to the new global environment, and enhancing Germany’s capacity to react flexibly to changing production conditions.

With this month’s Copenhagen Summit in mind, how will energy and climate change issues impact the future of economic relations between Germany and Luxembourg?

“Luxembourg and Germany have the same awareness when it comes to saving energy: insulation, heating efficiency and technology to prevent wasting energy. We generally have the same position on climate change and the role of renewable energy. That’s why we are investing in research and development together. The German Board of Science and its Luxembourg counterpart recently signed an agreement on joint research. A good example is the joint research into flexible solar panels. There are also investments like the new hydroelectric power plant in Vianden, which is a joint venture between Luxembourg’s new integrated energy utility and Germany’s largest energy utility RWE.

What other observations have you made about Luxembourg?

“Luxembourg is an example for the international community, spending one per cent of GDP on economic cooperation and aid for developing countries. That’s a very high figure. Also, my impression is that Luxembourg is a very happy country. There is a general atmosphere of harmony. It is a very international and sophisticated place. It can only be happy here.”