Luxembourgish coins

The county of Luxembourg (originally Lützelburg), extending between the Meuse and Moselle rivers and including the Luxembourg province of Belgium, was one of the largest fiefs in the Holy Roman Empire. The history of the Grand Duchy of Luxembourg begins with the construction of Luxembourg Castle in the middle ages, located on a rocky outcrop known as the Bock, . Legend has it that Sigfrid, Count of Ardennes, constructed a small fort on the site of an old Roman fort called "Castellum Lucilinburhuc" given to him by the monks of the Abbey of St. Maximin in Trier in 963. Around this fort a town gradually developed, which became the center of a small but important state of great strategic value to France, Germany and the Netherlands. Luxembourg's fortress was steadily enlarged and strengthened over the years by successive owners, among others the Bourbons, Habsburgs and Hohenzollerns. The Luxembourgian dynasty provided several Holy Roman Emperors, Kings of Bohemia, as well as Archbishops of Trier and Mainz.

John of Luxemburg, king of Bohemia and father of Emperor Charles IV, made Luxembourg a duchy in 1354. In 1437 the ruling family became extinct and the castle passed briefly into Habsburg hands. The elder line of the house continued in Bohemia and other parts of the Roman empire, with Emperors Wenceslaus and Sigismund; the younger line, descended from Charles’s brother, Duke Wenceslaus, continued in Luxembourg. (The French noble family of Luxembourg was descended in collateral line from an early count of Luxembourg.).

In 1443, Philip the Good of Burgundy seized the duchy, which became one of the Seventeen Provinces of the Netherlands, and in 1451, he was confirmed in possession by the estates of Luxembourg. Luxembourg passed in 1482 to the house of Hapsburg following the death of Mary of Burgundy. For the ensuing three centuries it shared the history of the S Netherlands, passing from Spanish to Austrian rule in 1714. The southern part of the duchy, including Montmédy, Thionville, and Longwy, was ceded to France in the Peace of the Pyrenees (1659). In 1684, Louis XIV of France seized Luxembourg, an action that caused alarm among France's neighbours and resulted in the formation of the League of Augsburg in 1686. In the ensuing war France was forced to give up the duchy, which was returned to the Habsburgs by the Treaty of Ryswick in 1697. Occupied by the French during the French Revolutionary Wars, the duchy was formally ceded to France by the Treaty of Campo Formio (1797).

The Congress of Vienna (1814–15) officially made Luxembourg a grand duchy, in personal union through the sovereign with the Netherlands. However, its military value to Germany prevented it from becoming a part of the Dutch kingdom. Luxembourg became a member of the German Confederation, and the fortress in the capital was garrisoned by Prussian troops. When in 1830 the Belgians rebelled against William I of the Netherlands, Luxembourg shared in the revolt. Belgium, on gaining independence, claimed the entire grand duchy; it eventually obtained (1839) the major part (i.e., the present Belgian Luxembourg province). The remainder, continuing in personal union with the Netherlands as well as a member of the German Confederation, became autonomous and was granted a constitution in 1848.

Luxembourg took part in the Belgian revolution against Dutch rule. Between 1830 and 1839 it was considered as a province of the new Belgian state. By the Treaty of London in 1839 the status of the grand duchy was confirmed, but the country was cut in two, losing more than half of its territory to Belgium (as the Belgian province of Luxembourg). The loss of its French-speaking lands left the Grand Duchy of Luxembourg as a predominantly German state, although French cultural influence remained strong. The loss of Belgian markets also caused painful economic problems for the state. Recognizing this, the grand duke integrated it into the German Zollverein in 1842.

When the German Confederation was dissolved in 1866, William III of the Netherlands agreed to sell the grand duchy to France, nearly provoking war between France and Prussia. At the London Conference of 1867 the European powers declared Luxembourg a neutral territory; its fortress was dismantled and the Prussian garrison withdrawn. William III died (1890) without a male heir; his daughter Wilhelmina succeeded him in the Netherlands, but Duke Adolf of Nassau, from a collateral line, became grand duke of Luxembourg.

Grand Duke Adolf was followed in 1905 by William IV and in 1912 by Marie Adelaide. In 1914, Germany violated the neutrality of the grand duchy and occupied it for the duration of World War I, but the government and Grand Duchess Marie Adelaide were allowed to remain in office throughout the occupation (until 1918), bringing accusations of collaboration from France. It was liberated by U.S. and French troops. Two American divisions were based in the state in the years following the War. At Versailles the Belgian claim to Luxembourg was rejected and its independence reaffirmed.

Grand Duchess Marie Adelaide abdicated in 1919 in favor of her sister, Charlotte, who married Prince Felix of Bourbon-Parma.

Germany again invaded (May 10, 1940) neutral Luxembourg in World War II. The grand duchess and her cabinet fled abroad, and a government in exile was established in London. The state was placed under military occupation until August 1942, when it was formally incorporated into the Third Reich as part of the Gau Moselland. Allied troops liberated Luxembourg in Sept., 1944. Luxembourg entered the United Nations (1946) and the North Atlantic Treaty Organization (NATO) in 1949, and it received Marshall Plan aid.

A constitutional revision (1948) abolished the perpetual neutrality of the grand duchy, a status that in practice had ended with the introduction of compulsory military service (1944–67). It became a founding member of NATO (1949) and the United Nations, a signatory of the Treaty of Rome, and constituted a monetary union with Belgium (Benelux Customs Union in 1948). In 1958, Luxembourg joined with Belgium and the Netherlands to establish the Benelux Economic Union and became.

In 1961, Prince Jean, son and heir of Grand Duchess Charlotte, was made his mother’s representative as head of state; she formally abdicated on November 12, 1964, and Prince Jean became grand duke. In 1995, Jean-Claude Juncker, of the Social Christian party, became premier, replacing Jacques Santer, who became head of the European Union’s European Commission.

Grand Duke Jean abdicated in favor of his eldest son, Prince Henri, in October, 2000.

The pre euro currency was the franc (LUF) from 1854 until 2002. It was subdivided into 100 centimes.

The conquest of most of western Europe by Revolutionary and Napoleonic France led to the French franc's wide circulation, including in Luxembourg. However, incorporation into the Netherlands in 1815 resulted in the Dutch gulden becoming Luxembourg's currency. Following Belgium's independence from the Netherlands, the Belgian franc was adopted in 1839 and circulated in Luxembourg until 1842 and again from 1848. Between 1842 and 1848, Luxembourg (as part of the German Zollverein) used the Prussian Thaler.

In 1854, Luxembourg began issuing its own franc, at par with the Belgian franc. The Luxembourg franc followed the Belgian franc into the Latin Monetary Union in 1865. In 1926, Belgium withdrew from the Latin Monetary Union. However, the 1921 monetary union of Belgium and Luxembourg survived, forming the basis for full economic union in 1932. In 1935, the link between the Luxembourg and Belgian francs was revised, with 1 Luxembourg franc = 1¼ Belgian francs.

In 1941, the Luxembourg franc was replaced by the German reichsmark at a rate of 10 francs = 1 reichsmark. The Luxembourg franc was reestablished in 1944, once more tied to the Belgian franc at par.

1 Luxembourg franc was equal to 1 Belgian franc. Belgian francs were legal tender inside Luxembourg and Luxembourg francs were legal tender in Belgium. Nevertheless, payment with Luxembourg banknotes were commonly denied by shopkeepers in Belgium, either by ignorance or by fear that their other customers would refuse the banknotes (again, either by ignorance or fear of being denied payment with it later), forcing them to go through the hassle of a trip to their bank to redeem the value of the banknote.