The iron and steel industry, located along the French border, is the most important single sector of the economy. As a result of timely modernization of facilities, cutbacks in production and employment, government assumption of portions of Arbed's debt, and recent cyclical recovery of the international demand for steel, the company is again profitable. Its productivity is among the highest in the world. The company specializes in production of large architectural steel beams and specialized value-added products. There has been, however, a relative decline in the steel sector, offset by Luxembourg's emergence as a financial center.
Banking is especially important.
In 1996, there were 222 banks in Luxembourg, with 21,000 employees. Political stability, good communications, easy access to other European centers, skilled multilingual staff, and a tradition of banking secrecy have all contributed to the growth of the financial sector. Germany accounts for the largest-single grouping of banks, with Scandinavian, Japanese, and major U.S. banks also heavily represented. More than 9,000 holding companies are established in Luxembourg. Government policies promote the development of Luxembourg as an audiovisual and communications center.