Luxembourg’s Prime Minister Jean-Claude Juncker has resigned after being forced out of power by his coalition partner for failing to curb the excesses of the secret services.

Jean-Claude Juncker, prime minister since 1995 and the European Union's longest serving government chief, tendered his resignation on Thursday to Grand Duke Henri, the royal head of state who himself has been implicated in media reports of espionage.

Juncker has proposed holding a general election in October, seven months ahead of schedule.

He announced his decision after a charged seven-hour debate, prompted by a motion from junior coalition partners, the Socialists, calling for the dissolution of parliament and elections.

A parliamentary report found that the country’s intelligence agency had, among other offences committed from 2003 to 2009, illegally bugged politicians’ phones, sought payments for access to officials and bought luxury cars for private use.

The report criticised Juncker for having little control over the agency, known as SREL, despite being the minister with overall responsibility for it.

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

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

'Wrong choices'

Best known in Europe for his eight years at the helm of the eurozone finance ministers group, Juncker was the continent’s longest-serving leader and had been in power for 18 years.

Some opponents accused the 58-year-old of abusing the secret service for his own and his party’s benefit, but he angrily denied that during the parliamentary debate.

"The intelligence service was not my top priority," Juncker told legislators. "Moreover, I hope Luxembourg will never have a prime minister who sees SREL as [his or her] priority."

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

His centre-right CVS party is the dominant force in the country’s politics and, with its socialist partner, holds 39 of 69 seats in the small country’s parliament.

Political scandals are rare in wealthy Luxembourg, which is one of the world’s most politically stable nations. The CVS has led every government but once since World War Two.