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Liechtenstein (09/09)


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For the most current version of this Note, see Background Notes A-Z.

PROFILE

OFFICIAL NAME:
Principality of Liechtenstein

Geography
Area: 61.7 sq. miles. (160 sq km.); about the size of Washington, DC.
Cities: Capital--Vaduz.
Terrain: 66% mountains, the remainder hills and plateau situated next to the Rhine.
Climate: Cold winters, hot summers; due to the south wind (Föhn), the climate can be described as temperate varying by season.

People
Nationality: Noun--Liechtensteiner(s), adjective--Liechtenstein.
Population (2007): 35,356, of which 66% are Liechtensteiners, 10.1 % are Swiss, 5.7% Austrians, 3.4% Germans, and 3.3% Italians.
Annual population growth rate: 0.5% (or 188 persons).
Religions (2000): Roman Catholic 78.4%, Protestant 8.3%, others 13.3%.
Languages: German (official), Alemannic dialect.

Government
Type: Hereditary constitutional monarchy.
Independence: January 23, 1719 Imperial Principality of Liechtenstein established; July 12, 1806 established independence from the Holy Roman Empire.
Constitution: October 5, 1921.
Branches: Executive--Chief of state: Prince Hans Adam II (assumed executive powers on August 26, 1984, acceded to the throne on November 13, 1989); the Hereditary Prince Alois, son of the monarch, was born on June 11, 1968. Alois was appointed the permanent representative of the Prince on August 15, 2004. Head of government: Klaus Tschütscher (since March 25, 2009). Cabinet: Five cabinet members. The cabinet is elected by the parliament, and approved by the Prince. Legislative--unicameral parliament or Landtag (25 seats; members are elected by direct popular vote under proportional representation to serve four-year terms). Judicial--District Court (low), Superior Court (medium), Supreme Court (high).
Administrative subdivisions: The country is subdivided into 11 municipalities.
Political parties: Patriotic Union (VU), Progressive Citizens' Party (FBP), and the Free List (FL).
Currency: Swiss Franc.
National holiday: Assumption Day, August 15.

Economy
GDP (2006): U.S. $3.6 billion (SFr. 4.55 billion).
Annual growth rate (2008): +1.1%.
Unemployment (February 2009): 2.7%, or 484 individuals. (Unemployment rate for the year 2008: 2.3%.)
Avg. inflation rate (2008): 0.7%.
Consumer price index: +3.4% since 2005.
Agriculture (7% of GDP; 1.9% of the total workforce): Wheat, barley, corn, potatoes, livestock, dairy products.
Industry (39% of GDP; 43.5% of the total workforce): Electronics, metal manufacturing, textiles, ceramics, pharmaceuticals, food products, precision instruments.
General services (25% of GDP; 38.6% of the total workforce).
Financial services (29% of GDP; 16% of the total workforce).
Workforce: 50.1% of total 32,000-person workforce is filled by foreign commuters (49% Swiss, 46.7% Austrians), and 32.5% by Liechtenstein citizens.
Trade (2007): Exports--$3.48 billion (SFr 4.18 billion). Main products--small specialty machinery, dental products, stamps, hardware, pottery. Major markets--Americas (16%), Switzerland (11%), EU-EEA (47%), Asia (23%). Imports--$2 billion (SFr 2.41 billion). Main products--machinery, metal goods, textiles, foodstuffs, motor vehicles. Major suppliers--EU countries, Switzerland.
Banking assets: In 2007, customer deposits were valued at $142.8 billion (SFr. 171.4 billion, +6.5% over one year).
Exchange rate (December 2008): Swiss francs per U.S. dollar = 1.2.

HISTORY
The Liechtenstein family, of Austrian origin, acquired the fiefs of Vaduz and Schellenberg in 1699 and 1713 respectively, and gained the status of an independent principality of the Holy Roman Empire in 1719 under the name Liechtenstein. The French, under Napoleon, occupied the country for a few years. Napoleon was the founder of the Rhine Confederation in 1806 and accepted Liechtenstein as a member. Liechtenstein considers itself therefore to be a sovereign state since 1806. In 1815 within the new German Confederation, Liechtenstein could prove its independence once more. In 1868, after the German Confederation dissolved, Liechtenstein disbanded its army of 80 men and declared its permanent neutrality, which was declared during both world wars.

In 1919, Liechtenstein and Switzerland concluded an agreement whereby Switzerland assumed representation of Liechtenstein's diplomatic and consular interests in countries where Switzerland maintains representation and Liechtenstein does not. According to an agreement concluded with Austria in 1979, Liechtenstein citizens may seek consular assistance from Austrian representatives abroad in countries in which neither Liechtenstein nor Switzerland maintain representation. After World War II, Liechtenstein became increasingly important as a financial center, resulting in more prosperity. In 1989, Prince Hans Adam II succeeded his father to the throne and in 1996 settled a long-running dispute with Russia over the Liechtenstein family's archives, which had been confiscated during the Soviet occupation of Vienna in 1945 and later moved to Moscow. Liechtenstein has been a participating state of the Organization for Security and Cooperation in Europe (OSCE) since the 1975 start of its predecessor, the Conference on Security and Cooperation in Europe (CSCE). Liechtenstein became a member of the Council of Europe in 1978 and joined the UN in 1990, the European Free Trade Association (EFTA) in 1991, and both the European Economic Area (EEA) and World Trade Organization (WTO) in 1995.

GOVERNMENT
According to the constitution, the government is a collegial body consisting of five ministers, including the prime minister. The prime minister and ministers are appointed by the Prince, following the proposals of the parliament.

Amendments to the constitution and new laws have to be adopted by parliament, signed by both the Prince and the prime minister, and published in the Principality's Law Gazette.

Prince Hans Adam II is the head of state. He is entitled to exercise his right to state leadership in accordance with the provisions of the constitution and of other laws. On August 15, 2004 Prince Hans Adam II entrusted Hereditary Prince Alois as his representative with the exercise of all sovereign rights pertaining to him, in accordance with the Liechtenstein constitution.

He represents the state vis-à-vis foreign states. He signs international treaties either in person or delegates this function to a plenipotentiary. In accordance with international law, some treaties only become valid when they have been ratified by the parliament.

The Prince's involvement in legislation includes the right to take initiatives in the form of government bills and the right to veto parliamentary proposals.

The Prince has the power to enact princely decrees. Emergency princely decrees are possible when the security and welfare of the country is at stake. A countersignature by the prime minister is required.

The Prince has the right to convene and adjourn parliament and, for serious reasons, to adjourn it for three months or to dissolve it.

The Prince nominates the government, district and high court judges, the judges of the Supreme Court, and the presidents and their deputies of the Constitutional Court and of the Administrative Court of Appeal on the basis of the names put forward by the parliament.

The Prince's other authorities include mitigating and commuting punishments that have been imposed with legal force and the abolition--i.e. the dismissal--of investigations that have been initiated. All judgments are issued in the name of the Prince.

Citizens elect the parliament directly under a system of proportional representation. Until 1989, 15 members represented the population of the two constituencies (6 for the lowland area and 9 for the highland area). Since 1989 the lowland constituency has been entitled to have 10 members and the highland area 15 members.

The duties and working procedures of the parliament are laid down in the constitution and in the parliament's standing orders. The parliament's main task is to discuss and adopt resolutions on constitutional proposals and draft government bills. It has the additional duties of giving its assent to important international treaties, of electing members of the government, judges and board members of the Principality's institutions, setting the annual budget and approving taxes and other public charges, and supervising the administration of the state.

The parliament observes its rights and duties in the course of sessions of the whole parliament and through the parliamentary commissions that it elects. All members of parliament exercise their mandates in addition to their normal professions or occupations. The president of parliament and his deputy are both elected at the opening meeting for the current year. The president convenes the individual meetings during the session, leads them, and represents the parliament externally. Parliament meets eight to ten times each year for a duration of one to three days depending on the agenda.

During the parliamentary recess--normally from January to February/March--a "state committee" assumes the parliament's duties, and such a committee must also be elected in the case of any adjournment or dissolution of parliament. A "state committee" consists of the president of parliament and four other members.

Under the Liechtenstein constitution, voters can call for a legislative referendum to oppose a parliamentary decision if they succeed in collecting 1,000 signatures. This threshold is increased to 1,500 signatures in cases of constitutional amendments and international treaties.

POLITICAL CONDITIONS
In the February 8, 2009 parliamentary elections, the Patriotic Union (Vaterländische Union, VU) won an absolute majority in parliament and thereby a mandate to form the government. With a voter turnout of 84.6%, the VU obtained 47.6% of the vote (9.4% greater than 2005), giving it 13 seats in the 25-member parliament. The Progressive Citizens' Party (FBP) obtained 11 seats in parliament, with 43.5% of the votes (5.2% less than 2005). A third party, the Free List, received 8.9% of the votes (down 4.1% from 2005) and one seat in the parliament. Following the elections, the VU offered to enter into a coalition with the FBP, which had led the government previously in a coalition with the VU. The VU and FBP subsequently agreed to form a coalition government in which the VU holds the prime ministership and two additional cabinet seats, and the FBP holds two cabinet seats, including the deputy prime ministership. On March 25, 2009 Klaus Tschütscher (VU) was confirmed as the new Prime Minister, succeeding Otmar Hasler (FBP).

There are 6 women in the 25-seat parliament and 2 in the 5-member cabinet. Women first gained the right to vote in Liechtenstein in 1984 and a growing number of women are active in politics. Women serve on the executive committees of the major parties.

According to Prime Minister Klaus Tschütscher, the most important tasks of the government under his leadership will be the revision of the 2009 budget with adjustments for the current financial and economic crisis, entry into force of a tax act compatible with European norms, and measures to dampen the recession and to secure jobs.

Principal Government Officials

Government Ministries
Prime Minister (Head of the Government), Government Affairs, Finance, and Family and Equal Opportunity--Klaus Tschütscher
Deputy Prime Minister, Economic Affairs, Transport, and Construction and Public Works--Martin Meyer
Public Health, Social Affairs, Environmental Affairs, Land Use Planning, Agriculture, and Forestry--Renate Müssner
Home Affairs, Education, and Sport--Hugo Quaderer
Foreign Affairs, Justice, and Cultural Affairs--Aurelia Frick

Ambassador to the U.S.--Claudia Fritsche
Permanent Representative to the UN--Christian Wenaweser

Liechtenstein maintains an embassy in the United States at 2900 K Street, NW, Suite 602B, Washington, DC 20007. Telephone (202) 331-0590.

ECONOMY
Since the signing of a customs treaty in 1924, Liechtenstein and Switzerland have represented one mutual economic area with open borders between the two countries. Liechtenstein also uses the Swiss franc as its national currency, and Swiss customs officers secure the border with Austria.

Liechtenstein is a member of EFTA and joined the European Economic Area (EEA) in 1995 in order to benefit from the European Union (EU) internal market. The liberal economy and tax system make Liechtenstein a safe, trustworthy, and success-oriented place for private and business purposes, especially with its highly modern, internationally laid out infrastructure and nearby connections to the whole world. In 2007, Liechtenstein had an obligation under the EEA treaty to harmonize its laws with EU directives 2005/36 and 1999/42 on the mutual recognition of EU and EEA university and professional diplomas. Liechtenstein is also part of the EU fund on research and technology and is entitled to participate in EU projects and subsidies.

The Principality of Liechtenstein has gone through dramatic economic and cultural development in the last 40 years. In this short period of time, Liechtenstein developed from a mainly agricultural state to one of the most highly industrialized countries in the world.

The Principality of Liechtenstein ranks among the strongest industrialized areas of Europe according to a 2008 government economic study. The strong industrial sector focusing on the metal and machine industries, vehicle manufacturing, and the electrical and optical areas were well able to sustain their position in spite of the growing service sector. Approximately 5% of the country's revenue is invested in research and development.

The significance of the industrial sector for the Liechtenstein economy is reflected in foreign trade. As a result of the global economic crisis, total exports decreased by -0.1% in 2008 compared to an increase of +14.5% in 2007, and imports decreased by -0.8% compared to an increase of +15.2% in 2007. Economic forecasts also expect Liechtenstein exports to drop by -5.7% in 2009.

The export economy is tied to Western Europe. Approximately 60% of all Liechtenstein exports go to Western Europe, followed by North America and East Asia. In 2007, about 11% of Liechtenstein's goods were exported to Switzerland, 47% to the EEA, 16% to the Americas, 23% to the Asia/Pacific, and the remaining share to the rest of the world. In 2007, the U.S. was one of the most important trading partners for Liechtenstein, with approximately $521 million (SFr. 597 million) worth of exports and $40 million (SFr. 44.3 million) of imports. Germany was first with a total trade value of $1.66 billion (SFr. 1.8 billion).

The Liechtenstein industrial sector contributes 39% of the country's GDP, services 54%, and agriculture 7%. Despite Liechtenstein's overall good competitive performance, some large manufacturing companies outsource their production to low-cost countries.

In addition to the industrial sector, Liechtenstein has developed a strong services sector, with an important financial center that includes a multitude of related service enterprises. In particular, branches such as real estate, information systems, and other services for enterprises showed a sharp increase, followed by trust companies and legal services. Five out of ten employees now work in the services sector. As a rule, these newly established enterprises tend to be small. The 2008 economic study showed that approximately 99.5% of businesses located in Liechtenstein are mostly small and medium-sized enterprises.

The economy of the Principality of Liechtenstein provides approximately 32,000 jobs, of which slightly more than half are filled by commuters from Switzerland, Austria, and Germany.

The Principality of Liechtenstein is known as an important financial center primarily because it specializes in financial services for foreign entities. The country's low tax rate and traditions of strict bank secrecy have contributed significantly to the ability of financial intermediaries in Liechtenstein to attract funds from outside the country's borders.

Liechtenstein has chartered 15 banks, 3 non-bank financial companies, and 71 public investment companies, as well as insurance and reinsurance companies. Its 257 licensed fiduciary companies and 81 lawyers serve as nominees for, or manage, more than 75,000 entities (primarily corporations, institutions, or trusts), mostly for non-Liechtenstein residents. Approximately one-third of these entities hold the controlling interest in other entities, chartered in countries other than Liechtenstein. The Principality's laws permit the corporations it charters to issue bearer shares. Until recently, the Principality's banking laws permitted banks to issue numbered accounts, but new regulations require strict know-your-customer practices for all accounts.

DEFENSE AND FOREIGN RELATIONS
Liechtenstein became a member of the Organization for Security and Cooperation in Europe’s (OSCE) predecessor in 1975, the Council of Europe in 1978, the UN in 1990, the European Free Trade Association (EFTA) in 1991, and both the European Economic Area (EEA) and World Trade Organization (WTO) in 1995.

U.S.-LIECHTENSTEIN RELATIONS
The relations between the two countries are good. The two countries in 2002 signed a mutual legal assistance treaty focused largely on jointly combating money laundering and other illegal banking activities. On December 8, 2008, the two countries also signed a tax information exchange agreement.

The U.S. does not have an embassy in Liechtenstein, but the U.S. Ambassador to Switzerland is also accredited to Liechtenstein.

Principal U.S. Official
Ambassador--Donald S. Beyer Jr.

The U.S. Embassy in Switzerland is at Sulgeneckstraße. 19, 3001 Bern, Switzerland, telephone: (41) (31) 357-7011.



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