I.

Introduction

Liechtenstein, independent principality, bordered on the north by Switzerland and Austria, and on the south and west by Switzerland. One of the smallest independent states in the world, it has a total area of 160 sq km (62 sq mi). The capital is Vaduz.

II.

Land and Resources

The western third of Liechtenstein lies in the flood plain of the upper Rhine. The rest of the country consists of foothills of the Rhätikon Massif, part of the central Alps, which rise in the south to peaks of more than 2,438 m (8,000 ft) above sea level. The Rhine, which forms the western border, and its local tributaries drain the greater part of the country. The Samina River drains the mountain valleys of eastern Liechtenstein. The climate is Alpine with mild winters; average temperatures range from -1.1° C (30° F) in January to 21.1° C (70° F) in July. The average annual rainfall is about 1,016 mm (40 in). Liechtenstein has a varied flora and fauna. One third of the land is forested; deciduous trees predominate on the lowlands, evergreens on the mountain slopes. Wildlife includes deer, chamois, fox, marten, and badger. Liechtenstein has few natural resources of economic significance. Almost all raw materials, food, and 94 per cent of energy has to be imported. Having a small population and no heavy industry, Liechtenstein generates only a few environmental problems. Although acid rain that originates elsewhere affects the country’s forests, this problem should decline as a United Nations (UN) air pollution protocol comes into force.

III.

Population

Liechtenstein has a population of 34,498 (2008 estimate), of whom about one third are resident aliens (1995; 12,083 resident aliens), with an overall density of about 216 people per sq km (558 per sq mi). The capital and principal urban centre is Vaduz, with a population of 5,050 (2006 estimate). Life expectancy is about 76 years for men, 84 years for women. Native-born Liechtensteiners are descended from the Germanic Alamanni people, who settled the region after ad 500. Standard German is the official language but the majority speak Alemannisch (called “Alsatian” in France) as a first language and are bilingual in German. Walser, a Germanic language from Switzerland, is the mother tongue for a small community in Liechtenstein. Approximately 87 per cent of the population is Roman Catholic. In 1995-1996, 1,998 pupils were enrolled in primary schools, and about 1,508 attended secondary schools. University-level education is provided by the University of Applied Sciences Liechtenstein (1961) in Vaduz.

IV.

Economy

Liechtenstein is rare among small states in having a well-diversified economy, with strong manufacturing, financial, and tourism sectors. Agriculture, the mainstay of the economy before World War II, now employs less than 2 per cent of the labour force. The expansion of economic activity since 1945 has helped to make Liechtenstein one of the world’s richest countries; average gross national product (GNP) per head (World Bank figure; 1992-1994 prices) is more than US$37,180, comparable with that of Switzerland. Growth has been fostered by favourable tax regimes and banking secrecy laws that have encouraged foreign investment in industry as well as the principality’s emergence as an important offshore financial centre; an estimated 100,000 foreign companies have their registered headquarters in Liechtenstein. In early 2002 the Organization for Economic Co-operation and Development (OECD) failed to convince Liechtenstein to sign up to its international agreement on tax evasion. The country’s close ties with Switzerland are also important; the Swiss franc is the official currency of Liechtenstein (Swiss Fr 1.13 equalled US$1; early 2008) and the two states have operated a customs union since 1924. Liechtenstein’s tiny domestic market means that the majority of manufactured goods are exported; the metals, machinery, precision instrument, pharmaceuticals, food-processing, and manufacturing industries are the most important. The sale of postage stamps, mainly to the almost 60,000 annual tourist visitors, is also significant, accounting for about 4 per cent of national income each year.

V.

Government

Liechtenstein was recently a constitutional monarchy governed by hereditary princes. The present monarch is Prince Hans-Adam II; his heir is Prince Alois (born 1968). In a contentious referendum held in March 2003, the populace acceded to the demands of the monarch in voting back an absolute monarchy. The king now has the power to dismiss the government. According to the constitution of 1921, legislative power is exercised by the unicameral parliament (Landtag), made up of 25 members elected to four-year terms by universal adult suffrage. On the recommendation of parliament, the prince appoints a chief of government and four councillors who form the government. Most governments since 1938 have been coalitions of the Fatherland Union (VU; Vaterländische Union) and the Progressive Citizens’ Party (FBP; Fortschrittliche Bürgerpartei in Liechtenstein). Switzerland has represented Liechtenstein diplomatically since 1919.

VI.

History

The modern history of Liechtenstein dates from 1719, when the country formally acquired its present name and ruling family with the consolidation of the counties of Vaduz and Schellenberg under the House of Liechtenstein. During the 18th and 19th centuries, as an independent principality of the Holy Roman Empire, it was economically and politically allied with the Habsburg monarchy of Austria. When that monarchy was abolished after World War I, Liechtenstein formed its present connection with Switzerland. Prince Franz Joseph II, who became sovereign in 1938, yielded executive authority in 1984 to his son, Crown Prince Hans-Adam, who succeeded his father in 1989. Also in 1984, a referendum granted women the right to vote in national elections.

Liechtenstein joined the UN in 1990 and the European Free Trade Association (EFTA) in September 1991. In December 1992 voters approved Liechtenstein’s membership of the European Economic Area (EEA). The election of October 1993 resulted in the formation of a coalition government headed by the Patriotic Union. Mario Frick was named head of government. Although participation in the EEA was approved by referendum in 1992, Switzerland, with which Liechtenstein had a customs union, had opposed the plan. Negotiations on participation in the EEA were envisaged in 1994. Participation in the EEA was approved by referendum in April 1995 and the country joined the World Trade Organization that same year. The ruling coalition retained control of the government in a general election held in January and February 1997. The coalition of the Patriotic Union (VU) and the Progressive Citizens’ Party (FBP) collapsed in March, however, losing power for the first time since 1938. A new, all-VU government was formed in April.

In 2000 reports by the Group of Eight, or G-8, and the OECD criticized Liechtenstein for failing to cooperate in the fight against international money-laundering. As a result, Liechtenstein changed its banking laws so that customers opening bank accounts may now no longer remain anonymous. However, in early 2002 the country failed to adopt further OECD proposals for reform.

In April 2001, Otmar Hasler of the FBP was sworn in as prime minister. Prince Hans-Adam controversially called for a referendum to alter the constitution, and after a majority vote of 64 per cent in March 2003 he was able to push through proposals that give him absolute powers in the country. In August he announced the move to hand over power to his son Alois in August 2004, while remaining head of state himself. The 2005 general election was won by the FBP with 12 seats; Otmar Hasler remained as prime minister for a second term.