Veteran Luxembourg PM Juncker resigns in spy scandal

Will step down as Socialists introduced motion calling for dissolution of Parliament

Luxembourg Prime Minister Jean-Claude Juncker, Europe's longest-serving leader, tenders his resignation today in a scandal involving the tiny nation's secret services, alleged to have indulged in misconduct on his watch.

"I am calling a cabinet meeting at 10 am local (0800 GMT) tomorrow and I will hand in the government's resignation," Juncker told the Luxembourg parliament yesterday evening after a highly emotional seven-hour debate.

Juncker said he would step down after his junior coalition partner, the Socialists, introduced a motion calling for the dissolution of parliament and early elections.

"There was no other choice than to hand in the government's resignation," said Juncker. "I note that a majority favours early elections."

He said he would likely run for a new political mandate but did not say whether he would try for a new term as head of government in elections that might be held in October.

Though aged only 58, Juncker has been in office for 18 years and in government for 30. He is best known in Europe for his recent tumultuous eight-year stint as head of the eurozone finance ministers group, which ended in January.

In a rare political drama in tiny uneventful Luxembourg, the parliament examined a report alleging that the country's SREL secret service, which the premier is supposed to oversee, had indulged in a series of misdemeanours from 2003 to 2009 that included illegal phone-taps, corruption, and even a dodgy car dealership.

"The intelligence service was not my top priority," Juncker told parliament earlier yesterday. "Moreover I hope Luxembourg will never have a prime minister who sees SREL as (his or her) priority."

Leader of his Socialist junior partner Alex Bodry said the prime minister "must assume his responsibilities, not because he was dishonest or incompetent but because he made the wrong choices."

"There were serious dysfunctions. The prime minister's responsibility is at stake."

The report was put together by a parliamentary committee after a Luxembourg weekly last year published verbatim a secretly taped conversation in 2007 between Juncker and the then head of SREL, Marco Mille.

In the recorded conversation, Mille revealed that his staff had secretly taped a conversation with Luxembourg's Grand Duke and that the sovereign was in regular contact with Britain's MI6.

But the parliamentary inquiry set up in the furore that ensued uncovered more dirt: the existence of 13,000 secret files on people and businesses, illegal wire-taps on business leaders, a counter-terror operation that in fact was a front to help a Russian oligarch pay 10 million dollars to a Spanish spy, and even a murky private dealership in luxury cars.

Addressing the chamber, Juncker hit back, saying the committee had failed to exercise its supervisory powers over the secret service. "It could've controlled it ... It did not."

Juncker last month survived the duchy's first confidence vote in 150 years over a separate scandal. The last confidence motion in Luxembourg was in 1848 and led to the fall of the government.

A fixture on the European scene and a passionate defender of the euro and the European dream, Juncker steered a tricky path during the financial crisis between the bloc's top two economies, France and Germany, who often held sharply differing views.