User:Dr Gangrene/Interwar

During the interwar period between 1918 and 1940, Luxembourg faced a myriad of challenges that tested its identity and resilience as a small, sovereign state nestled among larger powers. Doubts loomed regarding its independence, particularly amidst the turbulence of global politics. The monarchy's survival was called into question, prompting profound reflections on its role in a rapidly evolving world. Economic uncertainties compounded with the aftermath of war and the onset of the Great Depression, thrusting Luxembourg into a struggle for survival. Simultaneously, the introduction of universal suffrage brought a new era of political engagement, albeit fraught with ideological conflicts and societal shifts. Against the backdrop of rising tensions fueled by Nazi Germany's expansionist ambitions, Luxembourg navigated a landscape marked by uncertainty, adaptation, and profound demographic changes.

Background
The interwar period was a time of changes and ruptures: political, dynastic, economic, industrial, international, agricultural, and budgetary. Luxembourg was faced with reworking its political, economic and social life, in an upheaval comparable to that caused by the French Revolution.

At the same time, it was a period of transition between the 19th century and the "modernity" of the post-World War II period, a transition triggered by the events of World War I. The aspects that played a decisive role were social problems related to the war: rising prices, and difficulties in feeding the population.

It was the poorest — labourers and office workers — who bore the brunt of these problems. Business owners proved indifferent to this plight and blocked any solutions, while the government took a non-interventionist and "wait-and-see" attitude. Faced with this opposition, the working classes resorting to strikes, in 1917 and again in 1921, seeing no other way out of the brutal cost-of-living increases, which were threatening their survival. The Chamber of Commerce, reported that in 1917, the price hikes which had initally affected only foodstuffs, now also included clothes, shoes and housing, resulting in a "complete anarchy" in the fixation of items' value.

Reuter government (1918-1925)
On 28 July and 4 August 1918, elections took place for a Chamber of Deputies that was to revise the Constitution.

The prime minister Léon Kauffman resigned in September 1918, and Émile Reuter of the Party of the Right formed a government coalition of the four major parties represented in the Chamber (Right Party, Workers' Party, Liberals, People's Party).

German troops left the country after the armistice of 11 November 1918, making way for the Allied armies which passed through Luxembourg to occupy the German Rhineland. Allied forces were stationed in Luxembourg for six months, in order to maintain supply lines. This military presence was soon to prove a useful instrument for maintaining internal order.

Revolts, attempted republic, and abdication
As soon as the German occupation had ended, the Reuter government faced an internal crisis. After the German withdrawal, on 10-11 November 1918, a Soviet was formed in Luxembourg City on the same model as the workers' and peasants' councils in Russia. In the Chamber of Deputies, the liberals and socialists demanded an end to the monarchy. They accused the Grand Duchess of intervening in the political arena in a partisan manner, and of having been too close to the German occupiers in the war; their motion was narrowly rejected. The Grand Duchess and the government also faced hostility on the international stage from the Allies due to their wartime attitude towards the Germans.

The Luxembourgish political world was torn: on one side, the Right, which wanted to maintain the monarchy; on the other, adherents of a republican regime – themselves split between supporters of a union with France (socialists) or Belgium (liberals).

On 9 January 1919, the Company of Volunteers revolted and a Committee of Public Safety proclaimed a republic. These movements did not attract majority support, and were quickly repressed by the intervention of French troops.

However, the position of Grand Duchess Marie-Adélaïde was definitively compromised. The ministers convinced her that abdicating in favour of her younger sister Charlotte was the only means of saving the monarchy. On 15 January 1919, the new Grand Duchess swore her oath on the Constitution. The Reuter government had succeeded in managing the crisis.

New constitution and referendum on the monarchy
On 15 May 1919, the Chamber approved the law on the revision of the Constitution. The political stage of the country was to be changed forever by the introduction of universal suffrage for all Luxembourgish citizens, men and women, aged over 21 years; and the introduction of proportional representation. The proportion of those eligible to vote increased from 14% to 56% of the population. Universal suffrage put a definite end to the regime of the notables which had governed under a system of restricted suffrage, and introduced the era of party politics.

This democratisation was to the advantage of the political right wing. This was a country where despite the Industrial Revolution, most of the population was attached to a rural, traditional and conservative mentality. Liberalism, which had dominated the political stage during the 19th century, lost ground.

In order to reinforce the legitimacy of Grand Duchess Charlotte, the government decided to have her position confirmed by the voters. In a referendum on 28 September 1919, Luxembourgers were invited to express their wishes on the economic future of the country, the political regime (monarchy vs republic), and the Grand Duchess personally. A large majority (80%) pronounced themselves in favour of maintaining the monarchy, which could now rely on both constitutional and democratic legitimacy.

Elections: a new political reality
Just a few weeks after the referendum, voters could express their will again. The Right emerged from the ordeal of the war considerably strengthened, as witnessed by the absolute majority it achieved in the first elections held under the new system in October 1919, receiving 27 seats out of 48. This electoral success can be explained by several factors. The introduction of proportional representation by party list, introduced by the constitutional revision of 1918-1919 by an alliance of convenience of the Socialists and the Right, worked in favour of parties with a wide popular foundation. The Right benefitted from this more than the Socialists, thanks to the simultaneous introduction of votes for women. The Socialist Party, true to its principles, had advocated for women's right to vote while knowing that this might damage the party in the short term. The clear and determined stance of the Right during the crisis of 1918-1919 likely also paid off electorally. In focusing fully on preserving the dynasty, it was sure to strike a sensitive chord in the sub-conscious of the rural population. At the elections of 26 October 1919 the Right benefitted from the momentum of the referendum (28 September) and the pro-monarchist feeling (a majority of 78% was in favour of maintaining the dynasty). Finally, there was the place of propaganda. There was no doubt that the clergy threw all its weight into the fight. The Luxemburger Wort, which had been outspoken during the war, ran riot during the 1918-1919 period.

Taking account of the new majority, the ministers Collart, Liesch (liberal) and Welter (independent) tendered their resignations. However, the Grand Duchess and the Prime Minister refused to accept, as they wanted to maintain a national union government. Collart left the government in January 1920, Liesch and Welter in April 1921. From then on, the cabinet consisted only of right-wingers.

Social policy
The development of mass trade unions, and the short-lived creation of a Soviet after the war, revealed a profound disquiet in Luxembourgish society. From 1914 to 1920, purchasing power shrank by 300%. It was essentially the workforce – workers, private employees, or civil servants – that were suffering from the price rises and food shortages. In order to defuse a possibly explosive situation in society, the Reuter government made concessions, with a social policy inspired by German legislation. Taking its lead from the demands of the workers' movement, it introduced the 8-hour working day without a reduction in pay, from December 1918. In April 1919, the government created factory councils in industrial companies with over 50 workers. This organ of conciliation allowed workers' representatives to negotiate better pay and working conditions. Torn between the conflicting interests of employers and employees, the government then started to backtrack. Consequently, after a large protest, it extended factory councils to all establishments with at least 15 workers.

Despite these measures, a crisis erupted in 1921. Reacting to massive lay-offs and pay cuts in the steel industry, the Mine and Metalworkers' Union (BMIAV) started a prolonged strike. The government initially refrained from intervening in the labour dispute. However, the strike movement started to take on revolutionary characteristics. On 1 March, the strikers occupied the factory in Differdange. Giving way to the fears of business-owners and under pressure from the French and Belgian ambassadors, Émile Reuter abolished the factory councils by decree of 11 March 1921. The government appealed for French troops to intervene, who managed to establish order in the mining area alongside Luxembourgish gendarmes and soldiers from the Company of Volunteers. The steelworkers' strike also failed because it was not able to mobilise workers in other industries.

After the war, the government gave private employees, civil servants, and railway workers a significant improvement in their working conditions. The law of 31 October 1919 gave private employees several advantages which distinguished them from manual workers: separate delegations, the 8-hour day, annual paid leave of 10 to 20 days dependent on length of service, and measures that gave security of employment. The Grand Ducal decree of 14 May 1921 gave railway workers a status similar to that of civil servants, especially with regards to pensions and security of employment. The civil servants, for their part, had their pay indexed with inflation. Drawing lessons from the strike, the government put in place various organs for discussion and consensus. The law of 4 April 1924 created five professional chambers: the Chamber of Commerce, the Chamber of Artisans, the Chamber of Work, the Chamber of Private Employees, and the Chamber of Agriculture.

Currency
The government took advantage of its exit from the Zollverein to create a proper national currency, a symbol of its sovereignty. A decree of 11 December 1918 regulated the exchange of the 200 million German marks in circulation, for Luxembourgish francs. This transaction brought about several logistical problems. The printing of new notes did not proceed fast enough, and the exchange rate of 1,25 was considered by some to be unreasonably generous towards investors. The new franc was not backed by any gold reserves, and had no value abroad. The government also had the intention of creating a monetary union with Luxembourg's new economic partner. This partner's currency would be legal tender in the Grand Duchy. In 1921, the Grand Duchy borrowed 175 million Belgian francs.

Steel industry
With the end of the Zollverein, Luxembourg's steel industry faced a major reorientation and restructuring, with German capital replaced by French and Belgian capital. Existing companies were restructured, and new companies created. This process was led by industry, and the government barely was barely involved.

Railways
After the war, Luxembourgish railways also changed hands. After the armistice, French military authorities occupied the main network. The lines of Guillaume-Luxembourg were exploited for the benefit of the French state, as were the Chemins de fer d’Alsace et de Lorraine. On 19 December 1918, the Luxembourgish government withdrew from its railway treaty with Germany. However, Belgium was also interested in making use of the main Luxembourgish network. France agreed to withdraw if the Belgian and Luxembourgish governments reached an agreement, but continued to exploit Guillaume-Luxembourg in the meantime. The economic cooperation treaty with Belgium (UEBL) stipulated that the question of railways be dealt with. In May 1924, Reuter signed a treaty with Belgium which required the unification of the Guillaume-Luxembourg and Prince-Henri networks under a Board of Directors where Belgian representatives would have a majority. On 20 January 1925, the Chamber of Deputies, moved by anti-Belgian feelings, rejected the treaty, provoking a government crisis. ARBED, which feared the influence of the Société Générale de Belgique on Luxembourgish railways, had also opposed the government's plans.

Prüm government (1925-1926)
The Chamber of Deputies' rejection of the railway treaty with Belgium brought about the Reuter government's resignation. As it was not possible for a new government majority to be formed, the Chamber was dissolved and new general elections were called for 1 March 1925. The election saw various changes in the political landscape, as nine different parties were henceforth represented in the Chamber. The Right lost its absolute majority, and held on to 22 out of 47 seats. Yet it refused to enter into coalition with any party that had voted against the railway treaty. Pierre Prüm, leader of the Independent National Party, was asked to form a new government, and relied on an eclectic alliance of liberals, socialists, and some Deputies on the right.

Although the Socialist Party was not directly represented in the government, it constituted the Prüm government's main support, alongside the Independent National Party. Under the impetus of the socialists, the government took a number of social measures. One of its first acts was to re-establish the workers' delegations, in factories with over 20 workers. However, the bill on workers' holidays, which was debated in the Chamber from May 1926, divided the liberals and socialists. As it no longer had a parliamentary majority, the Prüm government resigned on 15 July 1926.

Bech government (1926-1937)
After the Prüm government's resignation, the Grand Duchess had initially intended to confide the formation of a government to Hubert Loutsch, who had previously been prime minister. However, the man associated with the "coup d’état" of 1915 was unacceptable in the eyes of the left. In the end, Joseph Bech was chosen as head of government, and managed to rapidly reach an agreement with the liberals.

Scholarly descriptions of Bech's politics differ. Guy Thewes, in the official history of Luxembourgish governments, terms Bech a "pragmatic conservative"; while Marc Lentz and Michel Pauly describe him as belonging to the "social-reactionary wing" of the Right Party and being a "declared enemy" of trade unions; Trausch describes him as representing the "socially conservative wing" of the party. The coalition between the Party of the Right and the liberal movement lasted until 1937. The partial elections of 3 June 1928, 7 June 1931 and of 3 June 1934, did not change the power relations, although there were several ministerial reshuffles.

Belgian currency devaluation
The economic fluctuations of the inter-war period sorely put the UEBL to the test, as Belgian monetary policy caused constant concerns to the Luxembourgish government. On 25 October 1926, the Belgian government devalued the Belgian franc, to which the Luxembourgish franc was attached. Luxembourgish currency experienced the first devaluation in its history. The director-general of Finances, Pierre Dupong, immediately took measures to stabilise the franc, by aligning it with the pound sterling. He then sought advice abroad, consulting the president of the Reichsbank, Hjalmar Schacht, on the possibility of setting up an autonomous monetary system. This resulted in the law of 19 December 1929, which aimed to give the Luxembourgish franc a solid foundation, by defining it in relation to gold, and by creating a gold reserve. However, in late March 1935, the Belgian government, proceeded with another major devaluation of Belgian currency. In Belgium, financial and economic difficulties justified such a measure, but in Luxembourg, the public finances were balanced, and export industries such as steel benefited from this. The Luxembourgish government decided to only follow the Belgian devaluation of 28% with their own devaluation of 10%. In effect, Dupong refused to dispossess small investors and to effectively cut salaries through a too strong devaluation. From this moment and until 1944, the Luxembourgish franc was worth 1,25 Belgian francs. The abandonment of parity with Belgian currency complicated financial operations and disadvantaged Luxembourgish exports relative to international competition.

Stock exchange and holdings law
After the depression of the immediate post-war period, the Luxembourgish economy saw a phase of expansion from 1924 et 1929. The increase in financial and economic activity is shown by the creation of 829 new companies from 1919 to 1928. This required the creation of a stock exchange, which the Chamber of Deputies authorised in December 1927. The Bech government also introduced legislation in 1929 on financial holding companies, provided them with a very favourable fiscal framework. While this had little effect at the time, in the 1970s, it became one of the decisive factors in the growth of the financial services industry.

Economic crisis and the UEBL
From 1930, the international crisis triggered by the Wall Street Crash of 1929, also affected Luxembourg and Belgium. Production and exports started to collapse. The crisis provoked a return to protectionism in all countries, and Belgium and Luxembourg each put in place protective measures without notifying the other: a quota for certain products, import licences, etc. An economic border was re-established between the two countries. Bilateral negotiations finally resulted in several agreements in 1935 that upheld free trade between the two countries, dealt with a number of monetary questions, and put a cap on the circulation of Luxembourgish currency. The Luxembourgish government succeeded in obtaining numerous concessions for its agriculture. Bech, who was also the Minister for Agriculture, wanted to protect this sector, which remained one of the pillars of Luxembourgish society (employing 30% of the active population in 1935) and was the main electoral base of the Party of the Right. However, these protective measures were to postpone necessary structural reforms, and made it all the more difficult to adapt to the international market.

Social policy
Although the crisis of the 1930s caused a slowdown in the Luxembourgish economy, the rate of unemployment remained relatively low: a maximum of 2,159 job-seekers in 1933. This was mostly due to the government's immigration policy. While foreigners constituted 40% of the steel industry's workforce in 1929, this had decreased to 10% by 1935. In the meantime, a large number of foreign workers were laid off, and sent back to their country of origin. Foreign workers played the role of a "safety valve".

Salaries and collective bargaining
However, while the crisis' effects on unemployment were softened, it had grave consequences for purchasing power. In the 1930s, the question of workers' salaries was again at the centre of social debate. The government advocated moderation and feared that a social policy that was too generous would damage the competitiveness of Luxembourgish industry. Business owners refused all negotiation on the question of salaries. The social struggle heated up in December 1935 when the government postponed the vote on a law that provided for the introduction of collective bargaining, and the creation of an organ of arbitration. The Christian and socialist trade unions united to mobilise the masses, demanding an increase in salaries and legal recognition of the unions. On 12 January 1936, a large protest attracted 40,000 participants. The Bech government decided to back off. A Grand-Ducal decree on 23 January 1936 created the National Labour Council, an arbitration organ which contained, under the direction of the government and on equal basis, representatives of business-owners and workers. The same year, article 310 of the penal code was abolished, and a law guaranteed union rights.

The social policy of the Minister for Social Welfare and for Work, Pierre Dupong, drew its inspiration from the Church's social doctrine, as defined in the encyclicals Rerum Novarum and Quadragesimo Anno; this doctrine rejected the socialist concept of class struggle. It was concerned with bringing about harmonious labour relations, by creating organs for conciliation and arbitration, and with achieving an improvement of workers' condition by prudent reforms.

Housing
The Bech government, in which Pierre Dupong represented the Christian social wing, had always attached great importance to the question of housing. Allowing workers or employees to become house owners seemed the most certain means of preventing workers' political radicalisation. The government also favoured the construction of individual houses instead of the collective rented housing that was so frequent in social accommodation. In 1929, it created the Service for Popular Housing, attached to the National Society for Cheap Homes. This body granted loans at a reduced interest rate for the acquisition of cheap housing, and for the hygienic improvement of homes. Numerous families received advantageous conditions. By 1940, the Service had funded more than 2000 new buildings.

Muzzle law and referendum
The crisis of the 1930s gave an impetus to the Communist Party, which had been born from the split of the Socialist Party in 1921. Revolutionary ideas gained in popularity among workers in the mining basin, causing concern in conservative circles. As a young Deputy, Joseph Bech had witnessed the unrest of 1917 to 1921, and this had left a profound impression on him. The Prime Minister was also influenced by authoritarian and corporatist tendencies which were growing in his own party, especially through the intermediary of Jean-Baptiste Esch, a young writer for the Luxemburger Wort.

Rise of National Socialism in Germany, on Luxembourg's doorstep.

When the Communists achieved their first electoral successes and in 1934 managed to get their general secretary Zénon Bernard elected to the Chamber of Deputies, Bech decided to act. The Chamber invalidated the election of the Communist Deputy under the pretext that as a revolutionary, he could not swear an oath on the Constitution. In his role as Minister of Education, Joseph Bech had two teachers who were also Communist Party members removed from their jobs. The government then prepared a bill "for the defence of political and social order", outlawing membership of any group whose "activity aimed to abolish or change the Constitution through violence or any other illicit means". The text was above all aimed at the Communist Party. In April 1937, the bill was passed by a large majority: 34 Deputies of the right and liberals, against 19 Deputies of the left and 1 abstention. However, the law, termed the Maulkuerfgesetz by its opponents, ran into strong opposition outside parliament orchestrated by the Workers' Party, the unions and young liberals, who saw in this measure an attack on freedom of opinion. Believing that he had popular backing, Bech agreed to put the law to a referendum, at the same time as the legislative elections of 6 June 1937 in the Nord and Centre constituencies. To great surprise, 50,67% of electors voted "No". The Party of the Right managed to keep hold of all its seats in the elections, but the liberals experienced significant losses. The socialists were the winners of the election. Even though a continuation of the government coalition would have been theoretically possible, with 31 seats out of 55, Bech felt himself repudiated, and tendered his resignation.

Trade unions and politics
From 1930, Europe was suffering the effects of the world economic crisis, and Luxembourg was not spared. However, the unemployment numbers in Luxembourg were kept at a tolerable level, at least until 1933, as since the 1920s boom large numbers of foreign workers had been brought in; when the downturn came, they were the first to be laid off, and were removed to their home countries. Consequently, they did not appear in Luxembourg's unemployment statistics. This situation applied particularly to the steel industry. In 1929, foreign workers made up 29,9% of the working population, but by 1939 this was down to 19,1%.

The Bech government (1926-1937) stood for a classic liberal economic policy and declined to intervene in the employment market in any way; it rebuffed the Workers' Party's suggestions of a minimum wage, unemployment insurance, or public investments programme. In 1932, Luxembourgers also started to be laid off, and the number of unemployed was estimated at 2,000. At the same time, due to pay decreases and unpaid furloughs, workers' purchasing power declined, so that businesses also suffered from the crisis. These developments had consequences both for politics and trade unions.

Communist successes
In 1928, the Communist Party of Luxembourg (KPL) had 200 members, hardly any of them Luxembourgish. For this reason, the government had never taken specific measures against the KPL. The depression after 1929 led to an upswing in the party's fortunes, which took place first at the trade union level. From the 1920s, the Communist International saw social democrats as the main enemy of the revolutionary working classes (whom the Communists believed they represented). Based on this, the KPL founded the Revolutionäre Gewerkschaftsopposition (RGO), the "Revolutionary Trade Union Opposition", to counter the socialist trade unions, especially the Luxembourg Mining and Metalworkers' Union (LBMIAV). The RGO achieved success especially with the miners, who were traditionally the most militant.

The rise of National Socialism in Germany, Clerical fascism in Austria, and rise of fascist movements in parliamentary democracies such as Belgium, France and elsewhere led the Comintern to change attitudes. Assuming that splitting the workers' movement would enable fascism, Communists embraced the popular front policy. The RGO in Luxembourg was disbanded in August 1934.

At the Chamber elections of 3 June 1934, a Communist Deputy was elected for the first time, Zénon Bernard, and the KPL only just missed out on a second seat, with 7,2% of the votes in the South constituency. This came as a shock both to the government and the Worker's Party.

The Bech government reacted harshly to the KPL's success. Bech, who was also the education minister, first dismissed two teachers, who were KPL members. On 27 November 1934, the election of Bernard was declared invalid, and the seat allocated to the Workers' Party.

In the local elections of October 1934, the Communists had taken seats in several communal councils. In Esch the KPL, with one seat, held the balance of power to tip the scales, intending to support a minority local government of the Workers' Party. The Luxembourgish government refused to allow this. An "order law" against the KPL, first proposed by Bech in 1933, was now again contemplated by the government parties. They saw a growing need to create a legal basis to act against the KPL. The standoff ended when in 1935 the local parties in Esch formed a grand coalition excluding the KPL. The planned order law was shelved.

The trade union wing around Pierre Krier that dominated the Workers' Party was at this time not interested in a polarisation of the political fronts. The free (socialist) unions, on a reformist course, sought legal recognition by the public authorities and the right to negotiate as social partners with business owners over pay and working conditions. The Workers' Party and free trade unions therefore rejected outright any cooperation with the KPL in the 1930s.

In December 1934 the free trade unions and the Luxembourg Confederation of Christian Trade Unions agreed to establish a trade union Wages Commission for major industry. The goals of this cooperation were to achieve recognition as negotiating partners with employers, being able to engage in collective bargaining and collective agreements, and pay demands. In 1935 the unions went on the offensive with a demand for a minimum wage of 250 francs per week. The employers' association refused any talks. The trade unions, whose presidents, Pierre Krier (LBMIAV) and Jean-Baptiste Rock (LCGB), were Deputies, now demanded a legal basis for their negotiation demands. It was only at the end of 1935 that the government was willing to debate this in the Chamber. A bill was drafted for the introduction of collective agreements. At the end of the discussions in the plenary (December 1935), Prime Minister Bech, after several previous attempts to delay, requested the adjournment of the discussion due to differences of opinion within the government. The industrial lobby had indeed exerted such strong pressure, especially on the Radical Liberals, that Bech once again backed down.

The trade unions' response was swift. In January 1936, a mass demonstration of 20,000-40,000 took place in the capital. For context, as of January 1935, major industry employed 17,511 people. However, they found broad support, even among the middle class. Such a show of power came as a surprise to the Right, who had under-estimated the trade unions' strength.

In January 1936, the Chamber of Deputies once again debated the collective bargaining law. However, the provision introducing collective agreements was not passed by the (right-wing) majority. A National Labour Council was established by grand-ducal decree, composed of representatives from employers, the government, and trade unions, to act as arbitrator in labour disputes. Thus, the trade unions were implicitly recognised as negotiating partners. Consequently, in March 1936 the Penal Code was finally amended, which until then had criminalised the formation of trade unions and calls for strikes.

Further developments were influenced by the neighbouring countries. In May 1936, the Popular Front won the parliamentary elections in France, and a large wave of strikes began to enforce social demands, affecting Lorraine in particular. In the Luxembourgish mines, which extended partly into French territory, secondary strikes took place to prevent the supply of Luxembourgish ore to French plants. In June, the Blum government was formed in Paris, and the Matignon Agreements were concluded, providing for wage increases. Soon, the 40-hour work week, paid holidays, and the right of collective bargaining were introduced. These achievements inspired similar demands in the Luxembourg worker movement, which had close contact with colleagues in Lorraine.

In Luxembourg, negotiations for the miners were scheduled for early July. When these ended inconclusively, the unions decided to call a strike for the first time in years, which started on 14 July after a strike vote with 99% approval. The work stoppage was used to discuss the acceptance of the compromise. The strikers accepted the government's proposal, which closely approached the maximum demands of the unions. Thus, the first collective agreement in the Luxembourg heavy industry was reached, despite the lack of a legal basis. This resulted in a wage increase of 6%, the introduction of minimum wages, and the indexation of wages (previously only applied to civil servants).

Following this breakthrough in mining, industry could no longer fundamentally oppose collective bargaining negotiations. By 1939, approximately 60 such agreements had been concluded.

Order law
Throughout this entire period of intense social conflict, the project for an order law remained in the drawer. Bech resurrected it at the end of 1936. On 20 October 1936, the Luxemburger Wort. once again called for a ban on the KPL. At the opening of the parliamentary session, Bech demanded swift adoption of the order law. It remained on the parliamentary agenda until its vote on 23 April 1937.

An explicit connection between the events on the social front in the first half of 1936 and Bech's renewed initiative cannot be proven in the sources. Nevertheless, it is unlikely that Bech randomly resurrected the project just a few months later. Bech belonged to the socio-reactionary wing of the Right Party and had always been an avowed enemy of the trade unions. Like his coalition partner, he was very close to the leading circles of big industry.

The breakthrough achieved by the unions in 1936 inspired new demands for 1937: a 40-hour work week, extension of paid vacation, increase in pensions, tax reform, etc. The positive economic situation since late 1936, thanks to the Luxembourg steel sector's deliveries to the German armaments industry, gave them new momentum. However, the employers were not interested in such demands. An order law would not only be a useful weapon in general in the social struggle but could also help further improve relations with the German Reich. This was understandable due to the steel industry's dependence on exports; a quarter of steel exports went to Germany in 1936. Furthermore, the right-wing parties and the industrial employers were deterred by the developments in France, which had significantly contributed to the social policy successes in Luxembourg.

Dupong-Krier government (1937-1940)
After the rejection in the referendum on the Maulkuerfgesetz, Joseph Bech presented his resignation to Grand Duchess Charlotte, who initially refused to accept it. In the face of an international situation that was growing more and more menacing, the idea gained ground that a coalition of the three main parties should be formed. But the socialists refused to join a government in which Bech served; the Catholics responded similarly with regards to the socialist René Blum. After five months of negotiations, a new government was formed by Pierre Dupong, of the Right Party and one of the founders of Christian democracy in Luxembourg.

The new coalition was practically a national union government. Bech remained in the government, retaining the Foreign Affairs portfolio, and Dupong became head of government. Two socialists joined the government: Pierre Krier, a trade unionist, and René Blum, a lawyer. The liberals were represented in the cabinet by Étienne Schmit; when he died in December 1937, no successor was acceptable to the other parties, so the liberals withdrew from the coalition in July 1939. The Workers' Party replaced René Blum with Victor Bodson in April 1940, weeks before the German invasion and the government's departure into exile.

The international situation continued to worsen, with war becoming a probability (see below). In the face of the international threat, the Chamber granted the government an extension of its power in order to allow it to take measures necessary to safeguard the interests of the state. Thus, on the basis of the laws of 28 September 1938 and of 29 August 1939, the government took a series of measures: a new declaration of neutrality, a ban on providing aid to the belligerent parties, increased monitoring of the borders, a ban on hunting in border areas, measures to save fuel and electricity, the creation of stocks of food and fuel, and monitoring of radio broadcasts and the press.

1939 independence centenary
In this context, the 1939 commemoration of the centenary of independence, in which the whole of Luxembourgish society participated, became a reaction against the German threat. Apart from being used by the government to demonstrate to European public opinion the country's desire for independence, the commemoration festivities succeeded in reconciling Luxembourgish society after it had been divided by the referendum of 1937, and reinforced national sentiments in the face of the external threat. The centenary celebrations were planned well in advance and enjoyed widespread support from the major political parties and from the population as a whole. Some reasons for this were the three major parties' participation in government (Right, socialists, and liberals), as well as the perceived threat of war from Germany.

Far right, nationalism and anti-semitism
In interwar Luxembourg, some conservative Catholic circles, including some government decision-makers, showed a "latent anti-Judaism". This rested on a perceived dechristianisation threatening the homogeneity of traditional Luxembourgish society since the 19th century, under the pressure of Marxism, industrialisation and liberalism. Certain members of the Luxembourgish Catholic clergy as well as the Catholic Luxemburger Wort openly expressed a religious anti-Judaism during this period. Racially-based antisemitism, on the other hand, had only a low number of followers in Luxembourg, limited to Luxembourgers who followed Nazi ideas.

The 1930s economic crisis reinforced economic and social antisemitism, which went beyond conservative Catholic circles. The competition by Jewish-run shops, threatening the Luxembourgish middle classes impoverished by the crisis, was regularly denounced by newspapers. However, the brutal antisemitic policy of Nazi Germany from 1933 became more and more troubling. Thus, the Luxemburger Wort denounced the Nazis' violence and their racism as being incompatible with Christian humanism, while at the same time expressing concern over Jewish political-economic dominance.

Foreign relations
On the international stage, after the end of World War I Luxembourg faced hostility towards the Grand Duchess and the government generally from the Allied states. On 23 December 1918, the French government refused to receive the Luxembourgish ministers in Paris, declaring that “The French Government does not consider it possible to have contact or negotiations with the Government of the Grand Duchess of Luxembourg, whom it considers as [having been] gravely compromised with the enemies of France". Émile Reuter, Auguste Liesch and Nicolas Welter returned to Luxembourg with empty hands. As seen above, the question of the dynasty was eventually resolved by Marie-Adélaïde abdicating. Her successor Charlotte was initially not recognised by the Allied governments. When Pope Benedict XV (after some hesitation) appointed a new papal nuncio accredited to the Grand Duchess, other states gradually followed suit and recognised her reign.

Luxembourg question and reorientation towards the West
During World War I, annexationist leanings had appeared in all three neighbouring countries, both among those in power and in public opinion. In Luxembourg, similarly, some defeatist currents of opinion appeared, which doubted the future of the country and wished for its absorption by one of the neighbours.

The Belgian government's angle was essentially political. For them, the main priority was to avoid Luxembourg falling into the French sphere of influence, as Belgium would then feel encircled. This fear of encirclement was a vivid one for Belgian elites, resting on an economic, strategic and historical analysis. The memory of Napoleon III still loomed large. From Belgian diplomacy's point of view, the "Luxembourg question" was about the right of a small state, Belgium, against a bigger state, France, to avoid absorption, domination, or encirclement. However, this ignored the fact that, for Luxembourg, Belgium was a "bigger state", and Luxembourg also had interests it sought to defend. Belgian diplomats made every effort to prevent a French solution to the Luxembourg question. During the war, they initiated a vast propaganda campaign, with the twin goals of persuading Luxembourgers that a close "union" (a word with different meanings over time) with Belgium was in their best interests after the end of hostilities, and of persuading Allied nations that Luxembourg was favourable to this.

During the first three months after the end of the war (November 1918 - January 1919), the Belgian government experienced several defeats in its Luxembourg policy. The French military removed Belgium from any participation in the occupation of Luxembourg.

New economic partner
Germany's defeat in the war rendered Luxembourg's existing treaties obsolete. Under Allied pressure, on 19 December 1918 the Luxembourg government renounced its membership of the Zollverein, and ended German rights to its railways. As it was not capable of living in isolation for any length of time, Luxembourg had to find a new economic partner. On 21 February 1919, the Reuter government started simultaneous talks with France and Belgium.

Negotiations with the Belgians were only undertaken with the intention of putting additional pressure on France, as a bargaining tool. However, negotiations with the French did not progress. The Reuter government decided to put the matter to a referendum. It was hoped that the voice of the people would make an impression, at a time when the war's victors were re-drawing the map of Europe according to principles of Wilsonian self-determination. At the time, for the whole of 1919 the situation of isolation was that of an economy that was in stasis, due to the interrupted coke supply and the closing-off of any external market with the loss of the German outlet. On 29 July 1919 Emile Reuter informed the Allies of this drastic situation in order to ask them to no longer oppose the planned referendum.

The debates around this question were well-known at the time. Already in 1917, the government had formed a commission to study the economic problems caused by the war and its consequences.

The agriculture sector had to choose between protectionist France (with high subsidies) and free-trade Belgium, with higher yields, lower production costs, and prices aligned with the world markets. Grain farmers leaned strongly towards France. Only wine-growers were in favour of partnering with Belgium, where they could sell their products more easily.

Most of industry — except glove-makers, the tobacco industry and brewers — favoured France, especially steel. By sharing a common fate with the Lorraine region, industry could secure its coke supply and benefit from transition arrangements for its exports towards Germany. For steel industrialists and unions who had lived for 50 years in a unified economic area, Lorraine-Saar-Luxembourg, an economic union with France offered the possibility of preserving some of the benefits of the Zollverein.

On 28 September 1919, 73% of Luxembourgish electors voted for an economic union with France. The Belgians reacted harshly to the referendum result, by breaking off the on-going economic negotiations, instituting an economic blockade, and freezing diplomatic relations.

However, the Luxembourgish government had to wait several more months before the French laid their cards on the table. In April 1920, the Belgians agreed to participate in the French occupation of the Rhineland. Subsequently, the French ambassador informed the Luxembourgish government that his country had no intention of forming an economic union, and advised it to seek an agreement with Belgium. Having succeeded in concluding a military pact with Belgium, France had no further need of Luxembourg. Since the beginning of the war, the Belgian authorities had shown annexationist tendencies towards the Grand Duchy.

After the French announcement, the Luxembourgish government re-started negotiations with Belgium. These were slow-going, but resulted on 25 July 1921 in a treaty on a customs and monetary union between the two countries: the Belgium–Luxembourg Economic Union, which came into force in March 1922. This stipulated the abolition of customs barriers between the two countries, a common external tariff, a common trade policy led by Belgium and a currency association. The Belgian franc became the common currency, while Luxembourg however retained its right to print Luxembourgish notes. Paradoxically, although an agreement with Belgium was not Luxembourg's first choice, after the referendum result, Luxembourg had a stronger negotiating position. The Belgian government could not risk another setback with respect to its domestic public opinion, and could no longer dictate its political wishes to Luxembourg from its position as one of the victor nationa of the war. It had to negotiate prudently and on a level playing field with its new partner; this explains the favourable clauses assuring Luxembourg a say in the Union's decision-making, and autonomous customs checks, two goals that Luxembourg had never achieved within the Zollverein.

The economic union was never a perfect one, as the treaty did not require the harmonisation of tax systems.

League of Nations
Before World War I, Luxembourg had not led a real foreign policy, feeling bound by its neutral status and solidly anchored in the German sphere of influence. The violation of its neutrality in 1914 and the questioning of its independence during 1918-1919 showed the Luxembourgish government that it was necessary to play a role on the international stage. Luxembourg was not invited to the Paris Peace Conference and was not one of the founding members of the League of Nations established by the Treaty of Versailles. Reuter intended to redefine Luxembourg's status, by adapting its neutrality to the post-war context. From 1919, the Reuter government took steps to have the Grand Duchy admitted to the League of Nations. Luxembourg's unarmed neutrality seemed at first to present an obstacle to its admission, as the League's charter provided for the passage of troops over member states' territory, and the participation in economic and financial sanctions against a hypothetical belligerent. At the same time, the United Kingdom considered that the small size of Luxembourg's territory was a problem. The Reuter government succeeded in overcoming these objections, partly by hinting at the possibility of a revision of the Luxembourgish Constitution. After 18 months of negotiation, on 16 December 1920, a session of the League of Nations in Geneva voted unanimously to have Luxembourg admitted. Later, the Luxembourgish government, conscious of the population's attachment to the principle of neutrality, let the constitutional revision drag on; it would never come into force.

Railways
The UEBL treaty provided that the issue of Luxembourg's railways, and who should exploit them, be dealt with. The Reuter government's treaty providing for the country's railways to be managed by a Belgian-controlled company failed to pass in the Chamber of Deputies, causing the government to collapse.

At the risk of provoking a break-up of the UEBL, the new prime minister Pierre Prüm sought a rapprochement with France. When he had only just taken office, the prime minister was received in Paris. On 9 October 1925, an agreement was reached with the Direction Générale des Chemins de fer d’Alsace et de Lorraine. This agreement gave France the provisional right to the Guillaume-Luxembourg network. France's interest in Luxembourg's rail network derived from strategic military and diplomatic considerations.

The "Bech system": assuring security, maintaining neutrality
After World War I, the main priority of Luxembourgish foreign policy was to assure the security of the Grand Duchy in the new organisation of Europe. Situated as it was between the two great military powers of the continent, France and Germany, the country would risk seeing its existence endangered in the event of a new conflict between its neighbours. The warming of Franco-German relations since the Locarno Conference in 1925 was a positive sign. The Locarno Treaties provided for countries' security to be guaranteed by the development of procedures to resolve international differences peacefully. Although the Treaties came about without Luxembourgish participation, they marked an important date in the evolution of the Grand Duchy's defence policy. The fact that France and Germany guaranteed the inviolability of national borders, and agreed not to use war, consolidated Luxembourg's international situation. Pierre Prüm made use of Locarno's possibilities for international arbitration to start talks with the Belgian and French governments, and Luxembourg would eventually use its dispositions to conclude several treaties with other countries.

Joseph Bech became prime minister and foreign minister in 1926. He continued Prüm's policy of bilateral agreements, and during his tenure, Luxembourg concluded treaties of conciliation and arbitration with several countries: Belgium and France in 1927; Spain and Poland in 1928; Portugal, Germany, Switzerland, the Netherlands, Czechoslovakia and the United States in 1929; Romania in 1930 and, finally, Italy and Norway in 1932.

More generally, Bech maintained a more active Luxembourgish presence on the international scene. He regularly participated in meetings of the League of Nations in Geneva, was present at the Conference on Disarmament in The Hague in 1932, and took part in meetings of the Oslo Alliance of the smaller states, Norway, Sweden, Denmark, Finland, the Netherlands, Belgium, and Luxembourg. From 1927, the Grand Duchy ratified most of the treaties signed under the auspices of the League of Nations. It also joined the Pact of Paris, in which the signatory countries agreed to renounce war as an instrument of policy, and the plan of Aristide Briand, who proposed a federal European union in 1930. In 1937, Bech explained Luxembourg's interest in participating in the Concert of Nations: "Before the war, neutrality was synonymous with total abstention. Since the creation of the League of Nations, the situation has changed. The small countries have, thanks to Geneva, a podium from which their voice can be heard from afar. Whatever may be the flaws of this institution, it constitutes for the small states, whether they are armed or disarmed like us, the sole safeguard against abuses of power."

Luxembourg's active participation in the work of the League of Nations did not mean that it was abandoning neutrality, however. For the politicians of the inter-war period, maintaining this regime seemed the only means of guaranteeing the security of the country and avoiding being caught up in a war. Joseph Bech took every opportunity to underline that "the collaboration which it [the Grand Duchy] may bring to the great work of Geneva shall not constitute a modification of its constitutional and conventional policy of neutrality".

Maintaining the UEBL
When he arrived at the Ministry of Foreign Affairs in 1926, Bech was confronted with the worrying deterioration of Belgo-Luxembourgish relations. The Belgium–Luxembourg Economic Union (UEBL), concluded in 1921, had got off to a bad start. In Luxembourg, the memory of Belgian annexationism was still alive. On the Belgian side, the Prüm government's overtly displayed sympathies for the French had caused displeasure. During his whole time in office, Bech tried to re-establish these relations with Belgium.

The economic fluctuations of the inter-war period sorely put the UEBL to the test. Above all, the monetary policy of the Belgian partners (e.g. currency devaluations) caused constant concerns to the Luxembourgish government. The rise of protectionism during the 1930s economic crisis and the rapid degradation of Belgo-Luxembourgish relations forced the two governments to start negotiations. On 23 May 1935, a group of treaties were signed in Brussels, which provided a solution to the deadlock. These agreements reaffirmed the principle at the root of the UEBL, namely free trade between the two countries, and instituted an administrative commission, composed in equal measure of Luxembourgers and Belgians, which became an essential instrument for Belgo-Luxembourgish cooperation.

Relations with Nazi Germany: growing tensions
Hitler's rise to power in Germany marked the beginning of a new era of tension in Europe. Hitler's foreign policy plans, namely the unification of all Germans and all Germanic minorities from various European countries into a "Greater Germany" and the conquest of "living space" (Lebensraum) to be achieved by expanding into the rich lands of Poland and Ukraine, would inevitably lead to a new conflagration in Europe.

Surrounded by powerful neighbours, Luxembourg viewed the looming threat of war with concern. Certainly, its independence and territorial integrity had been recognised by the great powers in the Treaties of London of 1839 and again in 1867. The danger of a war between France and Germany in 1867 over Luxembourg showed the need for its complete independence and neutrality guaranteed by the great powers. Yet this neutrality seemed to hold little value against the thinly veiled threats of the Nazi German leaders who. Despite the latter's words of appeasement towards the Luxembourgish government, they considered Luxembourg to be historically German territory. There was also the precedent that Germany had invaded Luxembourg in 1914, ignoring its neutral status. This raised questions as to how Hitler could be trusted, as a man who throughout his career violated multiple existing treaties.

Germany's 1936 remilitarisation of the Rhineland reduced the safety buffer between France and Germany to the small territory of Luxembourg. The presence of foreign troops in the Grand Duchy in case of a Franco-German war became a probability once more. As a member of the League of Nations, Luxembourg had thought itself safe from foreign designs, as Article 10 of the League of Nations charter reaffirmed the formal recognition of the territorial integrity and political independence of its member states. But with the German denunciation of the Locarno agreements, the principle of collective security was gradually abandoned by all states. While the great powers sought to ensure their security through a policy of alliances, small states sought to protect themselves through a policy of independence and neutrality.

The other Western neighbour of Germany, Belgium, reacted by pulling out from the military agreement with France, and by adopting a "policy of free hands". The Luxembourgish government likewise sought safety in a policy of neutrality. To consolidate the international position of Luxembourg, the Minister of Foreign Affairs, Joseph Bech, envisaged a diplomatic operation: the signatory states to the Treaty of London of 1867 should reaffirm Luxembourg's perpetual neutrality by a joint declaration. However, Belgium and the United Kingdom equivocated.

In the absence of a multilateral agreement, Bech tried to obtain a simultaneous undertaking from France and Germany, and resumed negotiations with them to obtain guarantees of non-intervention in the event of armed conflict. Arduous talks took place in 1938 and 1939, both in Berlin and Paris. However, they did not result in the signing of agreements due to the Czechoslovak (October 1938) and Polish (September 1939) crises. Nevertheless, these talks had the merit of clarifying the policy of respect and guarantee that Germany and France intended to practice regarding the independence of the Grand Duchy. While Germany had no problem in expressing towards Luxembourg all the promises that had been requested, France hesitated to commit itself. The French headquarters wanted to retain a right of passage across the Grand Duchy in case of German aggression. Thus, in spring 1939, with the spectre of war hovering over Europe, the government did not succeed in obtaining any formal guarantees. Despite assurances given by Luxembourg's two neighbours, the fears of the Luxembourgish government had by no means disappeared. It was scarcely imaginable that in the event of war between France and Germany, Luxembourg could stay out of the conflict. The country formed a convenient invasion corridor towards France, was served by an admirable road and rail network, and was a major producer of steel, which would be a major asset in wartime. A surprise invasion without a reaction from the other powers was probable.

In this context, in 1939 the commemoration of the centenary of independence, with the participation of the whole of Luxembourgish society, became a reaction against the German threat; and the government skilfully used the commemoration festivities to demonstrate to European public opinion the country's desire for independence and unity around the sovereign.

Throughout the period mentioned, bilateral relations between Germany and the Grand Duchy remained very tense. It was understood that, for its own defence, Luxembourg had only its neutrality status, which the government attempted to scrupulously respect.

On 10 April 1937 the Bech government passed a law prohibiting Luxembourgers from travelling to Spain to fight as part of the International Brigades in the Spanish Civil War, at the risk of up to six months' imprisonment. Nevertheless, 102 volunteers from Luxembourg fought on the side of the Spanish Republicans.

The Third Reich increased pressure on the Luxembourgish government. Bech had to justify himself more than once before the German ambassador Von Radowitz, on the subject of anti-German sentiments spread by a number of newspaper articles that were critical of the Nazis. The Germans demanded a "mental neutrality". In August 1939, the Reich made Dupong renounce his intention to immobilise his country's steel and metallurgical activities with belligerent countires in the case of war. Incidents at the border increased, as the German authorities tried to intimidate their smaller neighbour.

In the meantime, the government took precautions. For the first time, the budget included funds for surveillance of the border. The executive's powers were extended in the limits provided by the constitution. Passive defence measures were started, and the borders were strictly observed. Flights over the country's territory were banned. On 6 September 1939, Dupong made an official declaration of neutrality. On 15 September, a grand-ducal decree approved the maintenance of the status of neutrality. From January 1940, the government decided to go into exile. Under these conditions, it was decided that an "administrative commission", presided by Albert Wehrer, would take care of government business.

Refugees from Nazi Germany
Refugees started to leave Germany for surrounding countries, including Luxembourg, only a few months after Hitler's rise to power in January 1933. Similar to other countries in the area, the Luxembourgish government had a dilemma: faced with the economic crisis and Great Depression, it prioritised Luxembourgish workers, but also felt itself obliged to take host in refugees for at least some time for humanitarian reasons.

Economic history
Luxembourg's economic history between the wars is marked by the following key periods: the 1920-1921 world crisis, the 1924 recession, the 1929-1933 decline, and the recovery of 1938. In interwar Luxembourg, two socio-economic worlds were in collision: the world of industry and a more traditional one, the world of agriculture. It was a country that exported steel products, and imported finished consumer goods. Its heavy industry, making up for its enormous trade deficit in consumer objects, was compelled to export almost the entirety of its production. Out of an active population of 80,000 in 1929, more than half lived directly from the heavy export industries (iron and steel). It was an "open micro-economy", characterised by: 1) weak or non-existent domestic demand for certain products due to low population, making exportation necessary; 2) limited natural, human and financial resources that were insufficient and not varied enough to satisfy the panoply of national needs, leading to a need to import. The economy was dominated by the mining and steel industries, which depended in large part on the European and world markets. Luxembourg's exit from the customs union with Germany brought about a profound restructuring of the Luxembourgish economy, especially with regards to currency. Until 1918, it was mostly German money that circulated in Luxembourg, while Luxembourgish francs only played a small role. The question of currency occupied a central place in the negotiations which led to the Belgium–Luxembourg Economic Union.

The economic reorientation after the war affected the steel industry most of all, where French and Belgian capital now replaced German investors. German-owned factories were acquired by Franco-Belgo-Luxembourgish consortiums. Two new companies were created, Hadir and the "Société métallurgique des Terres rouges". Without government involvement, this process was driven by the great captains of the steel-working industry such as Émile Mayrisch or Gaston Barbanson.

"The Belgian market was too cramped and incapable of reserving for the Luxembourgish steel industry the geo-economic position that it had occupied during the time of the "Zollverein". For the iron industry, the interwar period was a difficult time, characterised by shrinking markets and a slowing of technological progress." Luckily, Luxembourgish foundry owners were able to diversify the palette of steel products in order to defend their position.

The years 1919-1922 were marked by unemployment, strikes, and lockouts. The economy picked up again in late 1923, leading to a few years of prosperity (1924-1929). It was from the mid-1920s that economic growth became very significant. While the general world economic outlook is one explanation, equally this growth was also facilitated by the stabilisation of the franc (October 1926) and of the steel market (International Steel Agreement). The prosperity from this growth was not felt by everyone, however. In 1922-1929, in the steel industry, production increased by 9.9% per year on average, while steelworkers' pay increased by 2.3% per year. The period saw workers' purchasing power effectively stagnate, alongside significant employment growth in the industry, and a remarkable increase in production. Productivity grew strongly. However, the expansion of the industry hardly improved the situation of workers.

The economy stagnated again in the early 1930s due to the world economic crisis. It was not until 1935/36 that the recovery of the steel industry became a reality, due to sustained growth of exports. Industrial exports to a Nazi Germany pursuing a rearmament policy caused exports to Germany to reach 30% of the total. For the short period of 1935-1938, steel sector growth, sustained growth in productivity and real salaries, and a slight growth in the price of agricultural products, helped to possibly attenuate socio-economic conflicts.

Luxembourg's economy in the 1920s experienced important growth, of which the main beneficiaries were industrial employers rather than workers, especially in the steel industry. These same years of growth highlighted the tensions and socio-economic contradictions of interwar Luxembourg. These were not, then, revealed by the 1930s economic crisis, though it did consolidate and reinforce them, perpetuating them until 1936.

Long-term trends
In the long term, several industries in Luxembourg struggled with the sudden breaking of economic ties with Germany and the Zollverein immediately after World War I, having been hitherto dependent on German capital and expertise, as well as the German markets. Some industry sectors were successful in this struggle for survival, and some not. The drapery and glove industries in Luxembourg stagnated, then shrank, then disappeared. The leather and clothes industries went from crisis to crisis, and would eventually disappear after World War II. A large number of small or medium businesses, oriented entirely towards the German market, failed to find other outlets in the 1920s-1930s world marked by protectionism and dumping. Two recurring factors here are: 1) the disappearance of a very large protected market (German Zollverein), which could not be replaced by Belgium, as a much smaller and traditionally free-trade country; 2) the high cost of labour, due to the presence of a large and prosperous steel industry.

On the other hand, the main industry of the country, steel, managed to survive the transition from the Zollverein to the world markets. The separation from the German market was, certainly, a terrible blow. The fact that it was not a fatal one had several reasons. For one, steel was a fungible product, with no brand or trademark or national particularities. After a few years, Luxembourgish steel managed to set up a worldwide sales network. It also helped that in the 1920s and 1930s, the world was desperate for steel, and Europe was its principal exporter. In terms of raw materials, for steel, Luxembourg possessed its only natural resource, the Minette iron ore. When it came to coal, ARBED could still use its old links with Germany to secure coal supplies. The owners of capital remained foreign. The German owners had been expropriated, and their capital was taken over by French interests which invested them in Luxembourgish companies. Belgian capital on the other hand was spread widely spread out among the public. By 1937, ARBED had effectively become a public company from a financial standpoint, whose shares were mostly held by small investors. This was true to a lesser extent for HADIR. French and Belgian shareholders had been forced by circumstances to accord a large degree of latitude to company managers, such that one could from now on truly speak of a "Luxembourgish steel industry". These companies were henceforth cut off from German technological contributions. This was unfortunate with respect to downstream industries. While in the Ruhr area, the metal, mechanical, and other industries connected to the steel industry were abundant, the Luxembourgish steel industry remained monolithic, based only on the production of common steel.

Immigration
Italian workers had left Luxembourg at the outbreak of World War I. While the economic situation was bleak immediately after the war, the economy recovered again from the mid-1920s. With the high economic activity, the Italians returned. They numbered 14,050 in 1930 compared to 10,138 just before World War I. Although they were more numerous, they did not regain their predominant position in the steel industry: while in 1913, 54.8% of Italians worked in the steel industry, they accounted for only 25.2% in 1930. The decline in the proportion of foreign workers in the steel industry was indeed a general phenomenon.

The decline of foreigners in the steel industry was compensated by their rise in the building and crafts sector. These post-war years were also marked by bitter internal disputes that tore apart the Italian community following the rise to power of fascism in Italy. According to a 1924 police report, "almost all Italians arriving in the country belong to the Communist party." These were, on the one hand, people fleeing their homeland because of their political beliefs, or otherwise who were expelled from France and Belgium due to their political activities. Communist elements were in a position of strength and took reprisal actions against the fascists. The Luxembourg authorities were concerned about this escalation of violence and the activities of a secret society called la cravate rouge ("the red tie"). The government showed vigour in repressing communists, with the most active ones being expelled. It was more lenient towards the fascists, as the steel industry and construction sectors were beginning to have an increasing need for Italian labour. It was necessary to avoid displeasing the new government in Rome for fear that it would prohibit emigration to Luxembourg.

Economic crisis and departure of foreign workers
In 1930, Luxembourg's population reached the record figure of 299,782. Five years later, the 1935 census recorded a decline for the first time in modern Luxembourg: the population had decreased by nearly 3,000 since 1930. This decline is explained by the significant decrease in the number of foreigners (a decrease of 17,382 since 1930), while the number of Luxembourgers increased by 14,382. The most significant demographic declines mainly affected the industrial cities of the Esch canton. In 1930, the canton still accounted for more than 1/3 of the total population of Luxembourg, this was no longer the case in 1935. The explanation for this lies in the severity of the global economic crisis. The economic crisis hit Luxembourg from early 1931, albeit with some delay compared to neighbouring countries. Exporting almost all of its production to an international market in recession, the Luxembourg steel industry saw its production capacity decrease by about 40% (1930-36). The crisis was therefore also reflected in the decline in jobs in the steel industry. In 1929, the Luxembourg steel and mining industry employed 28,938 workers; in 1935, the workforce barely exceeded 17,500. However, this impressive decline did not result in high unemployment.

The reason for this lies in the high percentage of foreign workers employed in the Luxembourgish industry: in 1930 foreign workers made up more than 40% of the total workforce; by 1937, their share had decreased to 22%. The economic crisis therefore primarily affected foreign workers. When they were laid off, with no real prospects of re-employment, they left the country. Thus, the high percentage of foreign workers that played a "safety valve function", since most foreigners could only work in the country with of an annual work permit. Luxembourgish workers were protected from foreign competition.

The use of foreign labour as a safety valve largely explains why the native Luxembourgish population was less severely affected than the populations of neighbouring countries. Additionally, the exodus of foreign workers (especially Italians) significantly strengthened the socio-cultural homogeneity of the Luxembourgish working class. In 1929, 65% of the workers employed in the national territory were of Luxembourgish origin; by 1937, this had increased to 80%. There was, then, a structural change in the mid-1930s of paramount importance both in the Luxembourgish working class and in society as a whole.

Rural exodus
In addition to this outflow of foreign workers, there was a second exodus that had been influencing Luxembourg's demographic and social structures since the late 19th century: the rural exodus. Between 1931 and 1935, the cantons where emigration far exceeded immigration were, in order of importance: Clervaux, Redange, Wiltz, Echternach, Grevenmacher, Capellen, Diekirch, Mersch, Remich, Luxembourg-campagne, and Vianden. As the canton of Esch also experienced a significant demographic decline, Luxembourg City was the only geographical entity whose population had increased (1931-1935: +7.34%). There was notably an increase in the number of foreigners by 1,200. On the other hand, during the same period, the capital attracted 2,800 people from the Luxembourgish countryside. Thus, amid an economic crisis, the rural population continued to leave the countryside in favour of Luxembourg City, and Esch canton. These were the only two areas that showed a population increase due to migration. The total population of the City of Luxembourg and Esch canton constituted more than 52% of the country's total population, despite the departure of foreign workers from the industrial centres of the Upper Alzette. In other words, the bipolarisation of Luxembourgish society between the canton of Esch and the capital on the one hand, and the countryside on the other, was not called into question by the economic crisis.

Economic sectors
In 1935, 30.2% of the workforce were engaged in agriculture, and 43.2% were employed in industry, together accounting for more than 2/3 of the workforce. The previous professional census, conducted in 1907, estimated the agricultural workforce at 43.2% and the industrial workforce at 38.4%. Between 1907 and 1935, the industrial sector surpassed agriculture "which, despite the nearly 20% increase in population, saw a considerable decrease in its relative share, and even its absolute numbers." During this 30-year phase, the industrial sector did surpass agriculture, but progression was slow (+4.8% in 30 years). The rural and working-class worlds thus quantitatively dominated Luxembourgish society in the 1930s. The former had been in socio-economic decline since the end of the 19th century, while the latter had just been strongly shaken by the economic crisis since 1930. The tertiary sector had been under-developed at the end of the 19th century and was developing at the beginning of the 20th century (18.4%). It grew considerably between 1907 and 1935. By the mid-1930s, 25% of the workforce were engaged in "services" (18.2% in trade, transport, hotels, and cafés; 6.8% in public and private services); the number of civil servants and employees increased from 5,500 to 18,382 in 28 years.

The strengthening of the tertiary sector, which sociologically determined the emergence of the middle classes, deserves some explanation. The population became more and more concentrated in urban centres. This led to the spread of retail stores and beverage outlets to feed this urban population — the distributive sector. Furthermore, the development of tourism during the interwar period caused an increase in hotels, restaurants, and guesthouses. The numerical increase in white-collar workers, is owed to the late establishment of the Luxembourgish state. Due to this lateness, the administrative services of the state were mostly established and expanded in the 20th century, rather than earlier. Due to the extent of industrialisation, the rise of mass education, and the state's increasingly interventionist policy, services grew continually, and required staff.

The rural world
In 1938, the number of main agricultural farms was 12,038. In 1934, 45% of farmers owned one horse, while 30% owned two. 80% of farmer-operators worked alone or were assisted by family members. These figures confirm the predominance of small family farms in rural society. However, the small family farm, the cornerstone of the rural world between the wars, was in crisis. Several factors contributed to this: the world economic crisis, poor profitability of farms, and archaic agrarian structures largely explain the persistence of the rural exodus, despite the strengthening of the protection regime for Luxembourgish agriculture by a benevolent government. And it was the young who left, abandoning a declining world for a world in crisis.

The working world
Young rural dwellers were leaving their villages for industrial centres, yet they often remained in close contact with the old world. Scholars have emphasised the importance of accessory farms as a link between the industrial world and the Luxembourgish countryside. A significant portion of workers from Luxembourgish rural areas owned small plots of land, typically less than 2 hectares. These farms were very common in the industrial region of the country (Esch canton). According to Gilbert Trausch, "a solid core of worker-farmers" had formed there. In cases where the worker gave up their accessory farm, they seemed to prefer renting out their land rather than selling it outright. The phenomenon of land ownership in the Luxembourgish working class constitutes, according to H. Quasten, a specifically Luxembourgish socio-economic characteristic. Quasten claims that: "the most important features of an industrial proletariat -propertylessness, high number of children-, were never exhibited by the industrial population of the Minett." This statement thus attempts to challenge the phenomenon of proletarianisation of the Luxembourgish working class. Behind the unifying term of "working world" lies a great diversity of conditions.

The working classes, born in the industrial revolution from 1870 to 1900, had long remained excluded from the society created by notables.

The failure of the strikes of 1917 and 1921 illustrates this isolation, but was also a watershed. The world of workers — finally organisd in trade unions, possessing a political arm in the Socialist Party and finding a favourable echo in the Christian-social wing of the Party of the Right, workers saw their living conditions improve and started, during the 1920s and 1930s, a long process of integration. The introduction of collective contracts, employers' recognition of trade unions and the abolition of Article 310 of the Penal Code in 1936 represented a key breakthrough.

Conclusion
The two socio-economic pillars of Luxembourgish society in the 1930s were the rural world and the working world. One was in decline, the other in crisis; both the rural world and the working world were the two major "sick men" of Luxembourgish society in the 1930s. While farmers seemed to benefit from the financial support of a benevolent government, the working world, on the other hand, constituted a socially marginalised and politically dominated class. It was only around the mid-1930s that the working world timidly began its social and political integration into Luxembourgish society:


 * 1) The departure of foreign workers during the economic crisis years favoured the socio-cultural consolidation of the working world.
 * 2) The major struggles jointly led by the two main unions (socialist and Christian) for union freedoms and to obtain a collective contract system (for example: the major protest on 12 January 1936) simultaneously strengthened the socio-political cohesion of the working world.

It was thus both socio-cultural homogeneity and socio-political cohesion that enabled the working world to emerge from its isolation. Despite the significance of these upheavals, Luxembourgish society overall presented an image of a sick, stagnant, and blocked society. Such was the social framework in which the referendum of 6 June 1937 took place.

Tourism
Tourism experienced significant growth in Luxembourg in the late 19th century and just before World War I, facilitated by new technologies. The invention and spread of railways and bicycles, and later, of automobiles and motorbicycles, made travel for leisure easier and more comfortable, providing a great impetus to tourism — also in Luxembourg. Travellers came from many locations to spend holidays in the small country which had been mentioned by several famous writers who had stayed there. Due to this advertising, as well as that of official tourist organisations, Luxembourg was gradually becoming a centre of attraction for foreign tourists. This development saw a sudden end with the advent of World War I.

However, tourism recovered rapidly after the end of the war. People who had been forced to stay put due to the hostilities had a strong desire to return to their pre-war habits of holidays and traveling. There was also a need to forget the sad times they had experienced, and to celebrate having survived the war. Tourist numbers in Luxembourg showed strong growth up until 1930, and then wavered, before remaining relatively stable until the eve of World War II. The slowdown of 1930 was due to the world economic crisis and monetary imbalances. In the 10 years after 1918, the number of hotels grew considerably, with some large modern hotels being built in Luxembourg City, Mondorf and Echternach. In addition, many people became aware of the possible profits from the hotel industry and set themselves up running a hotel or guesthouse part-time. In 1939, there were 275 hotels and guesthouses in the country.

Alongside this growth, tourism became more democratised during the 1920s and 1930s, facilitated by the introduction of paid holidays and a more progressive social legislation. As part of this democratisation, tourism also diversified. Alongside car tourism, there was public enthusiasm for open-air activities, walking, cycling, scouting, camping and the appearance of youth hostels (in July 1933, the first youth hostel opened in Steinfort). To this was added nautical tourism, on the rivers and lakes.

The development of tourism in Luxembourg was the result of voluntarist action; on the one hand, private initiatives by individuals, such as the amateur historian Jean-Pierre Koltz, who started the touristic exploitation of the old casemates of the Luxembourg fortifications in the 1930s. On the other hand, tourism was deliberately stimulated by private associations, such as the "Union of cities and tourist centres of the Grand Duchy of Luxembourg" (Union des villes et centres touristiques du Grand-Duché de Luxembourg) founded in 1931, and the Tourist Information Bureau of Luxembourg City (Syndicat d’initiative et de tourisme de la ville de Luxembourg), founded in 1933. After World War I, the state had left tourism promotions almost entirely to the private sector. During the 1930s economic crisis, attitudes changed, and the government increasingly became aware of the economic importance of the tourism sector and of the government's responsibility. The state started to strongly invest in promoting tourism. The state intervened more and more actively in the tourism sector, and from 1929 to 1939, the budget for promoting tourism increased from 300,000 to 700,000 francs.

Cinema
The number of sound films shown in Luxembourg went up significantly from September 1930. Sound films turned out to be profitable for cinemas. In the bigger cities, audiences had a selection of two or three sound films per week, while it took the smaller cinemas another one or two years to acquire sound equipment. In 1930 Luxembourgish audiences could see – among others – the following sound films in cinemas: The Queen's Necklace, Nights of Princes, Weary River, Spite Marriage, Say it with Songs, All Quiet on the Western Front, King of Jazz, Melody of the Heart, The Immortal Vagabond, Der Korvettenkapitän, and The Rhineland Girl.

In 1931, 17 of the 36 Luxembourgish movie theatres had the equipment to show sound films. By next year, this figure had increased to 24.

Luxembourg had specific language conditions that allowed for a rich and diverse range of movies to be shown. In the 1920s, there was a relative balance between American, German and French films.

In the 1930s, broadly speaking, German entertainment movies that were not seen as political, such as comedies, musical and adventure films, enjoyed great popularity in Luxembourg. Productions enjoying success included The Unsuspecting Angel (1936), Ball at the Metropol (1937) and Talking about Jacqueline (1937). Due to the great similarities between Luxembourgish and German, most Luxembourgers have a better understanding of German than of French, which partly explains the 1930s Luxembourgish receptivity to German-language films. Another reason, however, was a well-executed promotional strategy on the part of German studios, providing Luxembourgish cinemas with publicity material in the form of articles, stills, biographies of leading actors, and caricatures. This was not provided by French studios.

Films seen as having an overtly political stance were less appreciated in Luxembourg. In 1934, the government banned the German film Morgenrot after it was protested by liberal students and the political left. As a consequence of this, cinema-owners after this generally avoided showing German films that might give rise to similar controversy. Subsequently, hardly any films seen as Nazi propaganda were shown in Luxembourgish cinemas. Several German films were banned after the outbreak of the war in September 1939, including: the antisemitic musical comedy Robert and Bertram (1939), the political/militarist films Uproar in Damascus (1939), Escape in the Dark (1939) and Target in the Clouds (1939). In total, ten German films seen as having a political agenda were banned by the Luxembourgish government.

As stated above, non-political German cinema films saw success in Luxembourg; however, towards the end of the decade this was to change, as rising international tensions and the Nazis' pan-Germanic rhetoric were seen as threats to Luxembourgish independence, resulting in a diminished appetite for German films.

In 1937, the pacifist American film The Road Back was banned by the Minister of Justice, René Blum, after German diplomatic pressure. In the tense international climate, and aware of some Germans' eagerness to annex Luxembourg into the Reich, the Luxembourg government wanted to avoid antagonising relations with Germany. Anxious to not be accused of breaching its neutrality, Luxembourg sought by all means to avoid anything that might give the German government a pretext for a political or military intervention. The Luxembourgish government banned at least 10 films from 1938 to 1940 which had been denounced by Berlin for alleged "anti-German" leanings.

Newspapers
While the First World War unquestionably shook Luxembourgish society and its faith in progress, unlike the Second World War it did not cause a profound break in the evolution of the press. Under German occupation, Luxembourgish institutions continued to function, and newspapers continued to appear. The struggle between the political parties continued. At the same time, the first modern mass trade unions appeared during the war, and the workers' movement became radicalised but also divided. At the end of the war, Luxembourg experienced a profound political crisis that shook its institutions and political culture, with the introduction of universal suffrage and proportional representation, and the abdication of the monarch. The press had already become radicalised previously during the Kulturkampf period, and continued to do so during the interwar period with the split in the workers' movement, the proclamation of a Republic, and finally the rising fascist movement and controversy surrounding the "muzzle law" (Maulkuerfgesetz). Even before the end of the First World War, the first trade union newspapers were created, followed by the first women's magazines.

The circulation of the biggest newspapers at the time was as follows: In late 1927, Paul Schroell sold his Escher Tageblatt newspaper and printing press for one million francs, to the Luxembourg Mining and Metalworkers' Union and the National Association of Luxembourgish Railway Workers. They began publishing the Escher Tageblatt on 14 December 1927. Following this transaction, the Socialist Party abandoned its own party organ. In April 1933, Germany brought two lawsuits against Escher Tageblatt, leading to its publication being banned within its territory, for insulting Hitler.

Already in 1913, the liberal Luxemburger Zeitung experienced a significant drop in its circulation after being banned by Bishop Jean-Joseph Koppes. The introduction of universal suffrage in 1919 further weakened the liberal party of the notables and its press. Publisher Émile Schroell consequently sold the majority of the newspaper, which had become unprofitable, to a group of shareholders around Émile Mayrisch, the general manager of ARBED. The repeated splits within the liberal party and the undeniable dependence of the Luxemburger Zeitung on heavy industry further weakened and discredited the newspaper.

Radio
From 1928, inhabitants of Luxembourg could listen to the first regular radio programmes, broadcast from Belgium. In 1930, Pierre Dupong, the Minister of Finance, signed a concession agreement with the newly founded Société luxembourgeoise d’études radiophoniques, run by French businessmen, which was awarded the monopoly over radio broadcast rights from the Grand Duchy. In 1931, this became the Compagnie luxembourgeoise de radiodiffusion. Its entertainment and advertising programming was broadcast in French or English. In 1939 its broadcasts were made to cease, in order to not endanger Luxembourg's neutrality in the tense international atmosphere of the time.

Church
Pierre Nommesch was appointed the new Bishop of Luxembourg in 1920, after a two-year vacancy due to the questions about Luxembourg's survival as a state after the war. Nommesch became a bishop of reconciliation between church and state. In 1921 he accepted the provisions of the 1912 Education Law, finally ending the decade-long stand-off between church and state on this issue, introduced by his predecessor Jean-Joseph Koppes. In doing so he took a major step towards ending Luxembourgish society's division into clerical and anti-clerical camps.

After the end of World War I, the role of the Catholic Church as defender of the grand-ducal dynasty and the country's independence grew. Church celebrations of national holidays, as well as the nationalisation of church events, left a mark on the population during this period. In addition, under Nommesch, the church's orientation towards Rome (see: pilgrimages to Rome, celebrations of the papal coronations) and the veneration of Mary continued to be major features. Catholic associations were amalgamated into the Belgian-inspired Catholic Action around 1930.

The long-standing struggle between the Catholic Right on the one hand and liberalism, socialism and communism on other, culminated in the proposed Maulkuerfgesetz of 1937. In this debate, Bishop Joseph Laurent Philippe was silent; on the Catholic side, the fight was led by the Party of the Right and the Luxemburger Wort. However, the Church's general hostility towards socialist and communist forces continued; Bishop Philippe forbade the flying of red flags at funerals and strongly regulated the participation of church-goers in socialist or communist movements, increasing political tensions.