The Principality of Liechtenstein (Fürstentum Liechtenstein, ) is a tiny, doubly landlocked alpine country in Western Europe, bordered by Switzerland to its west and by Austria to its east. It is the last remnant of the Holy Roman Empire. Mountainous, it is a winter sports destination, although it is perhaps best known as a tax haven. Despite this, it is not heavily urbanized. Many cultivated fields and small farms characterize its landscape both in the north (Unterland) and in the south (Oberland). It is the smallest German-speaking country in the world.
At one time, the territory of Liechtenstein formed a part of the ancient Roman province of Raetia. For centuries this territory, geographically removed from European strategic interests, had little impact on European history. Prior to the reign of its current dynasty, the region was enfeoffed to a line of the counts of Hohenems.
The Liechtenstein dynasty, from which the principality takes its name, comes from Castle Liechtenstein in faraway Lower Austria, which the family possessed from at least 1140 to the thirteenth century, and from 1807 onward. Through the centuries, the dynasty acquired vast swaths of land, predominantly in Moravia, Lower Austria, Silesia, and Styria, though in all cases, these territories were held in fief under other more senior feudal lords, particularly under various lines of the Habsburg family, to whom several Liechtenstein princes served as close advisers. Thus, and without any territory held directly under the Imperial throne, the Liechtenstein dynasty was unable to meet a primary requirement to qualify for a seat in the Imperial diet, the Reichstag.
The family yearned for the added power a seat in the Imperial government would bring, and therefore sought to acquire lands that would be unmittelbar, or held without any feudal personage other than the Holy Roman Emperor himself having rights on the land. After some time, the family was able to arrange the purchase of the minuscule Herrschaft ("Lordship") of Schellenberg and countship of Vaduz (in 1699 and 1712 respectively) from the Hohenems. Tiny Schellenberg and Vaduz possessed exactly the political status required; no feudal lord other than their comital sovereign and the suzerain Emperor.
Thereby, on January 23, 1719, after purchase had been duly made, Charles VI, Holy Roman Emperor, decreed Vaduz and Schellenberg were united, and raised to the dignity of Fürstentum (principality) with the name "Liechtenstein" in honour of "[his] true servant, Anton Florian of Liechtenstein". It is on this date that Liechtenstein became a sovereign member state of the Holy Roman Empire. As a testament to the pure political expediency of the purchases, the Princes of Liechtenstein did not set foot in their new principality for over 120 years.
As a result of the Napoleonic Wars, by 1806, the Holy Roman Empire was under the control of French emperor Napoleon I. Napoleon dissolved the Empire and this had broad consequences for Liechtenstein: imperial, legal and political mechanisms broke down. The state ceased owing obligations to any feudal lord beyond its borders. Modern publications generally (although incorrectly) attribute Liechtenstein's sovereignty to these events. In reality, its prince merely became suzerain, as well as remaining sovereign lord. From 25 July 1806 when the Confederation of the Rhine was founded, the prince of Liechtenstein was a member, in fact a vassal of its hegemon, styled protector, French Emperor Napoleon I, until the dissolution of the Confederation on 19 October 1813.
Then, in 1818, Johann I granted a constitution, although it was limited in its nature. 1818 also saw the first visit of a member of the house of Liechtenstein, Prince Alois; however, the first visit by a sovereign prince would not occur until 1842.
Liechtenstein also had many advances in the nineteenth century, as in 1836, the first factory was opened, making ceramics. In 1861, the Savings and Loans Bank was founded, as was the first cotton-weaving mill. Two bridges over the Rhine were built in 1868, and in 1872 a railway line across Liechtenstein was constructed.
When the Austro-Prussian War broke out in 1866, new pressure was placed on Liechtenstein, as, when peace was declared, Prussia accused Liechtenstein of being the cause of the war through a miscount of the votes for war with Prussia. This led to Liechtenstein refusing to sign a peace treaty with Prussia and remained at war although no actual conflict ever occurred. This was one of the arguments that were suggested to justify a possible invasion of Liechtenstein in the late 1930s.
Until the end of World War I, Liechtenstein first was closely tied to the Austrian Empire and later to Austria-Hungary; however, the economic devastation caused by WWI forced the country to conclude a customs and monetary union with its other neighbour Switzerland. Liechtenstein's Army was disbanded in 1868 for financial reasons. At the time of the dissolution of the Austro-Hungarian Empire, it was argued that Liechtenstein as a fief of the Holy Roman Empire was no longer bound to the emerging independent state Austria, since the latter did not consider itself as the legal successor to the Empire. This is partly contradicted by the coeval Liechtenstein perception that the dethroned Austro-Hungarian Emperor still maintained an abstract heritage of the Holy Roman Empire.
In the spring of 1938, just after the annexation of Austria into Greater Germany, eighty-four year-old Prince Franz I abdicated, naming his thirty-one year-old third cousin, Prince Franz Joseph, as his successor. While Prince Franz I claimed that old age was his reason for abdicating, it is believed that he had no desire to be on the throne if Germany were to gobble up Liechtenstein. His wife, whom he married in 1929, was a wealthy Jewish woman from Vienna, and local Liechtenstein Nazis had already singled her out as their anti-Semitic "problem". Although Liechtenstein had no official Nazi party, a Nazi sympathy movement had been simmering for years within its National Union party.
During World War II, Liechtenstein remained neutral, while family treasures within the war zone were brought to Liechtenstein (and London) for safekeeping. At the close of the conflict, Czechoslovakia and Poland, acting to seize what they considered to be German possessions, expropriated the entirety of the Liechtenstein dynasty's hereditary lands and possessions in Bohemia, Moravia, and Silesia — the princes of Liechtenstein lived in Vienna until the Anschluss of 1938. The expropriations (subject to modern legal dispute at the World Court) included over of agricultural and forest land, also including several family castles and palaces. Citizens of Liechtenstein were also forbidden from entering Czechoslovakia during the Cold War. Liechtenstein gave asylum to approximately five hundred soldiers of the First Russian National Army (a collaborationist Russian force within the German Wehrmacht) at the close of World War II; this is commemorated by a monument at the border town of Hinterschellenberg which is marked on the country's tourist map. The act of granting asylum was no small matter as the country was poor and had difficulty feeding and caring for such a large group of refugees. Eventually, Argentina agreed to permanently resettle the asylum seekers. In contrast, the British repatriated the Russians who had fought for Germany to the USSR, and they all perished in the Gulag.
In dire financial straits following the war, the Liechtenstein dynasty often resorted to selling family artistic treasures, including, for instance, the priceless portrait "Ginevra de' Benci" by Leonardo da Vinci, which was purchased by the National Gallery of Art of the United States in 1967. Liechtenstein prospered, however, during the decades following, as it used its low corporate tax rates to draw many companies to the country.
Liechtenstein's current constitution was adopted in October 1921. It established in Liechtenstein a constitutional monarchy ruled by the reigning prince of the Princely House of Liechtenstein. It also established a parliamentary system, although the reigning prince retained substantial political authority.
The reigning prince of the Princely House of Liechtenstein is the head of state and, as such, represents Liechtenstein in its international relations (although Switzerland has taken responsibility for much of Liechtenstein's diplomatic relations). The prince may veto laws adopted by the parliament. The prince can call referendums, propose new legislation, and dissolve the parliament, although dissolution of parliament may be subjected to a referendum.
Executive authority is vested in a collegial government (government) comprising the head of government (prime minister) and four government councilors (ministers). The head of government and the other ministers are appointed by the prince upon the proposal and concurrence of the parliament, thus reflecting the partisan balance of the parliament. The constitution stipulates that at least two members of the government be chosen from each of the two regions. The members of the government are collectively and individually responsible to the parliament; the parliament may ask the prince to remove an individual minister or the entire government.
Legislative authority is vested in the unicameral "Landtag" (parliament) made up of 25 members elected for maximum four-year terms according to a proportional representation formula. Fifteen members are elected from the "Oberland" (Upper Country or region) and ten members are elected from the "Unterland" (Lower Country or region). Parties must receive at least eight percent of the national vote to win seats in the parliament. The parliament proposes and approves a government, which is formally appointed by the prince. The parliament may also pass votes of no confidence against the entire government or against individual members. Additionally, the parliament elects from among its members a "Landesausschuss" (National Committee) made up of the president of the parliament and four additional members. The National Committee is charged with performing parliamentary oversight functions. The parliament can call for referendums on proposed legislation. The parliament shares the authority to propose new legislation with the prince and with the requisite number of citizens required for an initiative referendum.
Judicial authority is vested in the Regional Court at Vaduz, the Princely High Court of Appeal at Vaduz, the Princely Supreme Court, the Administrative Court, and the State Court. The State Court rules on the conformity of laws with the constitution. The State Court has five members elected by the parliament.
In March 2003, the results of a national referendum showed that nearly two-thirds of Liechtenstein's electorate agreed to vote in support of Hans-Adam II's proposal of a renewed constitution which replaced the version of 1921. The implications of the referendum, the actual changes to the governance of Liechtenstein, and the repercussions of the vote in the wider context of Europe, are yet unknown.
On 1 July, 2007, the Liechtenstein Ruling Prince, H.S.H. Hans-Adam II, and Liechtenstein Prime Minister, Otmar Hasler, appointed Dr. Bruce S. Allen and Mr. Leodis C. Matthews, ESQ., both in the United States of America, as the first two Honorary Consuls in history for the Principality of Liechtenstein.
The principality of Liechtenstein is divided into 11 municipalities called Gemeinden (singular Gemeinde). The Gemeinden mostly consist only of a single town. Five of them fall within the electoral district Unterland (the lower county), and the remainder within Oberland (the upper county).
Liechtenstein is situated in the Upper Rhine valley of the European Alps. The entire western border of Liechtenstein is formed by the river. Measured north to south, the country is only about long. In its eastern portion, Liechtenstein rises to higher altitudes; its highest point, the Grauspitz, is . Despite its alpine location, prevailing southerly winds make the climate of Liechtenstein comparatively mild. In winter, the mountain slopes are well suited to winter sports.
New surveys using more accurate measurements of the country's borders in 2006 have set its area at , with borders of . Thus, Liechtenstein discovered in 2006 that its borders are longer than previously thought.
Liechtenstein is one of only two doubly landlocked countries in the world—being a landlocked country wholly surrounded by other landlocked countries; the other is Uzbekistan. It is the only country with a predominantly German-speaking population that does not share a border with the Federal Republic of Germany. Liechtenstein is the sixth-smallest independent nation in the world by land area.
Despite its limited natural resources, Liechtenstein is one of the few countries in the world with more registered companies than citizens; it has developed into a prosperous, highly industrialized, free-enterprise economy, and boasts a financial service sector as well as a living standard which compares favourably to those of the urban areas of Liechtenstein's large European neighbours. Relatively low business taxes—the maximum tax rate is 18%—as well as easy Rules of Incorporation have induced about 73,700 holding (or so-called 'letter box') companies to establish nominal offices in Liechtenstein. Such processes provide about 30% of Liechtenstein's state revenue. Liechtenstein also generates revenue from the establishment of stiftungs ("foundations"), which are financial entities created to increase the privacy of nonresident foreigners' financial holdings. The foundation is registered in the name of a Liechtensteiner, often a lawyer.
Recently, Liechtenstein has shown strong determination to prosecute any international money-laundering and worked to promote the country's image as a legitimate financing center. In February 2008, the country's LGT Bank was implicated in a tax-fraud scandal in Germany, which strained the ruling family's relationship with the German government. Crown Prince Alois has accused the German government of trafficking in stolen goods for its $7.3 million purchase of private banking information illegally offered by a former employee of LGT Group. However, the US Senate's subcommittee on tax haven banks charged that the LGT bank which is owned by the royal family, and on whose board they serve, "is a willing partner, and an aider and abettor to clients trying to evade taxes, dodge creditors or defy court orders.
Liechtenstein participates in a customs union with Switzerland and employs the Swiss franc as national currency. The country imports more than 90% of its energy requirements. Liechtenstein has been a member of the European Economic Area (an organization serving as a bridge between the European Free Trade Association (EFTA) and the European Union) since May 1995. The government is working to harmonize its economic policies with those of an integrated Europe. Since 2002, Liechtenstein's rate of unemployment has doubled, although it stood at only 2.2% in the third quarter of 2004. Currently, there is only one hospital in Liechtenstein, the Liechtensteinisches Landesspital in Vaduz. The GDP (PPP) is $1.786 billion, or $25,000 per person.
Liechtenstein's most recognizable international company and largest employer is Hilti, a manufacturer of concrete fastening systems. Liechtenstein also is the home of the Curta calculator and the principality produces a large portion of the world's false teeth. (Ivoclar Vivadent, Schaan)
The government of Liechtenstein taxes personal and business income and principal (wealth). The basic rate for the personal income tax is 1.2%. When combined with the additional income tax imposed by the communes, the combined income tax rate is 17.82%. An additional income tax of 4.3% is levied on all employees for the country's social security program. This rate is higher for self-employed, up to a maximum of 11%, making the maximum income tax rate about 29% total. Income from employment is taxed through monthly withholdings by employer.
The maximum business income tax rate is 18-20%.
|The first 200,000||1%||The next 400,000||2%||The next 600,000||3%||The next 800,000||4%||On residue over 2 million||5%|
The basic tax rate on wealth is 0.06% and the combined total rate is 0.89%.
Liechtenstein's gifts and estate taxes vary depending upon the relationship the recipient has to the giver and the amount of the inheritance. The tax ranges between 0.5% and 0.75% for spouses and children and 18% to 27% for non-related recipients. The estate tax is progressive (see table opposite).
The rate above is halved if the estate passes to the spouse, children, or parents.
The 2008 Liechtenstein tax affair is a series of tax investigations in numerous countries whose governments suspect that some of their citizens may have evaded tax obligations by using banks and trusts in Liechtenstein; the affair broke open with the biggest complex of investigations ever initiated for tax evasion in the Federal Republic of Germany. It is seen also as an attempt to put pressure on Liechtenstein, one of the remaining uncooperative tax havens along with Andorra and Monaco as identified by the Paris-based Organization for Economic Cooperation and Development in 2007.
Liechtenstein is the fourth smallest country of Europe, after the Vatican City, Monaco, and San Marino. Its population is primarily Alemannic-speaking ethnic Germans, although its resident population is approximately one third foreign-born, primarily German speakers from the Federal Republic of Germany, Austria, and the Swiss Confederation, other Swiss, Italians, and Turks. Foreign-born people make up two-thirds of the country's workforce. Nationals are referred to by the plural: Liechtensteiners.
The official language is German; most speak Alemannic, a dialect of German that is highly divergent from Standard German (see Middle High German), but closely related to those dialects spoken in neighbouring regions. In Triesenberg, a dialect promoted by the municipality is spoken. According to the 2000 census, 87.9% of the population is Christian, of which 76% adhere to the Roman Catholic faith, while about 7% are Protestant. The religious affiliation for most of the remainder is Islam 4.8%, undeclared 4.1% and no religion 2.8%.
Liechtensteiners have an average life expectancy at birth of 79.68 years (76.1 years for males; 83.28 years for females). The infant mortality rate is 4.64 deaths per 1,000 live births, according to recent estimates. The literacy rate of Liechtenstein is 100%. The Programme for International Student Assessment, coordinated by the OECD, currently ranks Liechtenstein's education as the 10th best in the world, being significantly higher than the OECD average.
N.B. Incidentally, with Liechtenstein's railways being run by the Austrian Federal Railways (ÖBB) and with special agreements existing between Liechtenstein's and Austria's Government, the country falls under the Austrian Verkehrsverbund Vorarlberg tariff region.Bicycle There are of marked bicycle paths in the country.Air Liechtenstein has no airport; the nearest large airport is Zürich. There is a small heliport at Balzers in Liechtenstein available for charter helicopter flights.
As a result of its small size Liechtenstein has been strongly affected by external cultural influences, most notably those originating in the southern German-speaking areas of Europe, including Austria, Bavaria, Switzerland, and Tyrol. The Historical Society of the Principality of Liechtenstein plays a role in preserving the culture and history of the country.
The largest museum is the Kunstmuseum Liechtenstein, an international museum of modern and contemporary art with an important international art collection. The building by the Swiss architects Morger, Degelo and Kerez is a landmark in Vaduz. It was completed in November 2000 and forms a “black box” of tinted concrete and black basalt stone. The museum collection is also the national art collection of Liechtenstein.
The other important museum is the Liechtenstein National Museum (Liechtensteinisches Landesmuseum) showing permanent exhibition on the cultural and natural history of Liechtenstein as well as special exhibitions. There are also two more museums: a Stamp museum and a Ski museum.
The most famous historical sites are Vaduz Castle, Gutenberg Castle, the Red House and the ruins of Schellenberg.
Music and theatre are an important part of the culture. There are numerous music organizations such as the Liechtenstein Musical Company, the annual Guitar Days and the International Josef Gabriel Rheinberger Society; and two main theatres.
The Private Art Collection of the Prince of Liechtenstein, one of the world's leading private art collections, is shown at the Liechtenstein Museum in Vienna.
Liechtenstein football teams play in the Swiss football leagues. The Liechtenstein Cup allows access to one Liechtenstein team each year in the UEFA Cup; FC Vaduz, a team playing in the Swiss Axpo Super League (i.e. the highest level of Swiss football) is the most successful team in the Cup, and scored their greatest success in the European Cup Winners' Cup in 1996 when they defeated the Latvian team FC Universitate Riga by 1–1 and 4–2, to go on to a lucrative fixture against Paris St Germain, which they lost 0–4 and 0–3.
The Liechtenstein national football team has traditionally been regarded as an easy target for any team drawn against them, a fact that served as the basis for a book about Liechtenstein's unsuccessful qualifying campaign for the 2002 World Cup by British author, Charlie Connelly. In one surprising week during autumn 2004, however, the team managed a 2–2 draw with Portugal, which only a few months earlier had been the losing finalists in the European Championships. Four days later, the Liechtenstein team traveled to Luxembourg where they defeated the home team 4-0 in a 2006 World Cup qualifying match. They are still considered by many to be an easier touch than most; however, they have been steadily improving over the last few years, and are now considered the best of the European "minnows", even though they were recently humbled 7-1 by Malta in March 2008. In the qualification stage of the European Championship 2008, Liechtenstein beat Latvia 1-0, score which prompted the resignation of the Latvian coach. They went on to beat Iceland 3-0 (October 17, 2007), which is considered one of the most dramatic losses of the Icelandic national football team.
As an alpine country, the main opportunity for Liechtensteiners to excel is in winter sports such as downhill skiing: The country's single ski area is Malbun. Hanni Wenzel won two gold medals and one silver medal in the 1980 Winter Olympics (she won bronze in 1976), whereas her brother, Andreas , won one silver medal (1980) and one bronze medal 1984 in the Giant Slalom event. With nine medals overall (all in alpine skiing), Liechtenstein has won more Olympic medals per capita than any other nation. It is also the smallest nation to win a medal in any Olympics, Winter or Summer. Other notable skiers from Liechtenstein are Marco Büchel, Willi Frommelt, Paul Frommelt and Ursula Konzett.
Amateur radio is practiced by some nationals and visitors. However, unlike virtually every other sovereign nation, Liechtenstein does not have its own ITU Prefix. It uses Switzerland's callsign prefixes (typically "HB") followed by a zero.
In June 2003, the state tourism agency decided to give a boost to the country's tourism by offering to rent out the country to businesses and other organizations for conference hosting, weddings, or other such events. The company will be given keys to Vaduz and be offered team-building/tourist activities and attractions, such as wine-tasting, tobogganing, and full access to one of the country's royal castles. It costs $375 a person, but it has to cater for no fewer than 450 people. Therefore, the minimum cost is approximately $170,000. Prince Hans-Adam II exploited this renting system by threatening to sell Liechtenstein to Bill Gates if he was not given more power. He was given the power he asked for, but he later claimed that he was in fact joking.
Karl Schwarzler, along with the entire nation of Liechtenstein, was awarded the Ig Nobel Prize in Economics in 2003 for this unique enterprise.
Liechtenstein follows a policy of neutrality and is one of few countries in the world to have no army, having abolished it in 1868 due to high costs. While the CIA World Factbook claims that the defense of Liechtenstein is the responsibility of Switzerland, Switzerland actually has no defense agreement with Liechtenstein. No defense treaty is mentioned in a description of the bilateral relationships between the two countries provided on Liechtenstein's official website.