Europe’s longest-serving leader sidelined after security service scandal

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One of the biggest political shakeups in Europe is happening in one of the continent's smallest, and wealthiest, countries: Luxembourg.

Prime Minister Jean-Claude Juncker has been dumped from government after 18 years in office, falling victim to a salacious scandal involving the Grand Duchy's security service.

A government inquiry earlier this year blamed him for not properly overseeing the agency, which it said had engaged in extensive unauthorized wiretaps, illegally sold luxury cars and may have been involved in a secret bombing campaign.

Mr. Juncker, 58, had been the longest serving leader in the European Union and he was a fixture in EU affairs. He helped draft the Maastricht Treaty, which established the EU. He was a driving force behind the creation of the euro. And he spent the past eight years heading Eurogroup, a working group of finance ministers that played a pivotal role in trying to resolve the eurozone financial crisis. His party, the Christian Social People's party, or CSV, had been in government in Luxembourg for all but five years since 1945.

Last week, parliamentary elections saw the CSV lose ground, dropping to 23 from 26 seats in the 60-member parliament. It remains the biggest bloc, but on Friday, Grand Duke Henri, the country's head of state, essentially sidelined Mr. Juncker by asking an opposition leader to try to form a coalition government.

"I don't like speaking about my feelings… But it does hurt," Mr. Juncker told reporters in Brussels on Friday after attending an EU leaders meeting. "I think I participated in over 120 European summits and 350 finance ministers' meetings. That is quite a bit."

Mr. Juncker had been forced to call early elections following problems that arose in July, after the Socialist Workers Party pulled out of a coalition with CSV because of the allegations surrounding the security service. In a scandal that shook the country, a government inquiry concluded the nation's spy agency engaged in extensive unauthorized surveillance of thousands of people. A former agency chief was also accused of using a microphone concealed in his wristwatch to secretly record a conversation with Mr. Juncker in 2007.

Mr. Juncker said he had felt confident after Sunday's vote, saying that even though his party had lost seats he should remain in power. "There is a huge difference between our party and the next two following parties, so I do think that we will be charged to form the next government," he said earlier this week.

The next prime minister is expected to be Democratic Party leader Xavier Bettel, the 40-year old mayor of the city of Luxembourg, which includes more than half of the country's 549,000 citizens. His party was the big winner in the election, picking up four seats, more gains than any other party. "It's a heavy responsibility that awaits me if we are to meet the challenges we face," he said Friday.

Luxembourg's status as a tax haven and a global banking centre has made it one of the wealthiest countries in the world. But unemployment has been rising along with housing costs. Mr. Bettel has promised to tackle both along with providing more funding to schools.

The result could have a silver lining for Mr. Juncker. He had faced criticism for being too involved in EU affairs and ignoring his duties back home. Now he is free to pursue a high-ranking EU office, including becoming president of the European Council, which is made up of the heads of state of EU members. And he already has something of an endorsement from German Chancellor Angela Merkel who said in Brussels on Friday: "I very much value the work of Jean-Claude Juncker – he is an experienced European, that is indisputable."