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Liechtenstein (11/03)


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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 square 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: Continental; cold, cloudy winters with frequent snow or rain; cool to moderately warm, cloudy, humid summers.

People
Nationality: Noun--Liechtensteiner(s); adjective--Liechtenstein.
Population (2001): 33,525 of which 34.3% are foreigners, mainly Swiss, Austrians, and Germans.
Annual population growth rate: 2.1%.
Ethnic groups: Liechtensteiners, Swiss, Austrians, and Germans.
Religions: Roman Catholic 80.4%, Protestant 7.1%, others 12.5%.
Languages: German (official), Alemannic dialect.

Government
Type: Hereditary constitutional monarchy.
Independence: Imperial Principality of Liechtenstein established January 23, 1719; established independence from the Holy Roman Empire July 12, 1806.
Constitution: October 5, 1921.
Branches: Executive--chief of state, Prince Hans Adam II, since November 13, 1989, but already assumed executive powers since August 26, 1984; Heir Apparent Prince Alois, son of the monarch was born on June 11, 1968, and will assume executive powers in August 2004. Head of government, Otmar Hasler (since April 5, 2001). Cabinet (five cabinet members); elected by the Diet and approved by the Prince. Legislative--Unicameral Diet or Landtag (25 seats); members are elected by direct popular vote under proportional representation to serve 4-year terms. Judicial--District Court (low), Superior Court (medium), Supreme Court (high).
Administrative subdivisions: The country is subdivided into 11 districts. Political parties: Fatherland Union (VU), Progressive Citizens' Party (FBP), and the Free List (FL). Currency: Swiss franc.
National holiday: Assumption Day, August 15.

Flag: flag of liechtenstein

Economy
GDP (2002): $1.8 billion, down from $2.6 billion in 1999.
Annual growth rate: N/A.
Unemployment: 1.68% (617 persons).
Avg. inflation rate (2003): 0.7% (same as in Switzerland because of the customs union).
Agriculture: Products--wheat, barley, corn, potatoes, livestock, dairy products.
Industry: Types--electronics, metal manufacturing, textiles, ceramics, pharmaceuticals, food products, precision instruments, tourism. Trade (2002): Exports--$1.8 billion, main products: small specialty machinery, dental products, stamps, hardware, pottery. Major markets--U.S., Germany, Switzerland, France, Italy, Taiwan, Japan, Austria, and U.K. Imports--$877 million: machinery, metal goods, textiles, foodstuffs, motor vehicles. Major suppliers--EU countries, Switzerland.

HISTORY
The Austrian Liechtenstein family acquired the fiefs of Vaduz and Schellenberg in 1699 and 1713 respectively, and they became an independent principality under the Holy Roman Empire in 1719 under the name Liechtenstein. The French under Napoleon occupied the country for a few years, but Liechtenstein regained its independence in 1815 within the new German Confederation. In 1868, after the Confederation dissolved, Liechtenstein disbanded its army of 80 men and declared its permanent neutrality, which was respected during both World Wars.

In 1919 Liechtenstein entrusted its external relations to neutral Switzerland. After World War II, Liechtenstein became increasingly important as a financial center, and the country became more prosperous. In 1989, Prince Hans Adam II succeeded his father to the throne, and in 1996 settled a long-running dispute with Russia over Liechtenstein family's archives, which had been confiscated during the Soviet occupation of Vienna in 1945 and later moved to Moscow. In 1978, Liechtenstein became a member of the Council of Europe, and then joined the UN in 1990, the European Free Trade Association (EFTA) in 1991, and both the European Economic Area (EEA) and the World Trade Organization in 1995.

GOVERNMENT
According to the Constitution, the government is a collegiate body and consists of the head of government and four governmental councilors. The head of government and ministers are appointed by the Prince, following the proposals of the Parliament.

Amendment to the Constitution or new law have to be adopted by Parliament, signed by both the Prince and the head of government, and published in the Principality's Law Gazette. Prince Hans Adam II is the head of state. He in entitled to exercise his right to state leadership in accordance with the provisions of the Constitution and of other laws.

He represents the state vis-�-vis foreign states. He signs international treaties either in person or delegates this function to a plenipotentiary. Some treaties under international law only become valid when they have been ratified by 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 head of government is, nevertheless, required.

The Prince has the right to convene and adjourn Parliament and, for serious reasons, to adjourn it for 3 months or to dissolve it. On the basis of the names put forward by Parliament, 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.

The Prince's other authorities include exercising the right to mitigate and commute 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 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 Parliament externally.

During the parliamentary recess--normally from January to February/March--a "state committee" assumes Parliament's duties, and such a committee also must 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. The duties and working procedures of Parliament are laid down in the Constitution and in Parliament's standing orders.

The Government of Liechtenstein is based on the principle of collegiality; namely, of colleagues collaborating with each other. The government consists of the head of government and four Councilors. The members of the government are proposed by the Parliament and are appointed by the Prince. Only men or women born in Liechtenstein and who are eligible to be elected to Parliament may be elected to the government committee. The two electoral areas of the country, the highlands and the lowlands, are entitled to at least two members of the government, and their respective deputies must come from the same area.

POLITICAL CONDITIONS
The political parties are the moving forces with regard to the composition of the government and in the Parliament. For the 2001-05 legislature period of office, one Councilor and three deputies are women. From 1938 to 1997 Liechtenstein had a coalition government. Until a few years ago there were only two parties in Parliament, the Fatherland Union and the Progressive Citizen's Party. Liechtenstein's distinctive form of coalition government came to an end in April 1997. The Fatherland Union took sole responsibility for the government during the 1997 to 2001 Parliament, with its members filling all the positions on the government committee. Since 2001 it has been the Progressive Citizen's Party that has provided all the members of the government. The minority parties, as opposition parties, act as a check on the government in Parliament and on parliamentary commissions.

The Liechtenstein electorate on March 16, 2003, endorsed Prince Hans-Adam II's proposal for a revision of the Liechtenstein Constitution with 64.3% of votes. Prior to the vote, the Prince indicated that he and the reigning family would leave the country if his endorsed Constitution failed to pass. The Prince now has the power to dissolve Parliament and appoint an interim government, dismiss individual members of government, and veto any parliamentary legislation by not signing the bill within 6 months. Without the approval of the reigning prince, no further constitutional amendments can be adopted, except in the case of a referendum abolishing the royal house. Finally, the Prince now has the final say on the appointment of judges, and the State Court loses its key competence to mediate between the government and the Prince on constitutional matters. The opponents of the Prince's proposal announced an appeal against the referendum decision before the Liechtenstein State Court. The Council of Europe has indicated that it may "monitor" the new Constitution.

Principal Government Officials

Federal Departments
Head of Government Government Executive, Finance, Families and Equal Rights, Building and Construction--Otmar Hasler
Education, Justice, Transport and Communication--Rita Kieber-Beck
Health, Social Services, Economy--Hansj�rg Frick
Interior, Culture, Sport, Environment, Agriculture and Forestry--Dr. Alois Ospelt
Foreign Affairs--Dr. Ernst Walch
Attorney General--Robert Walner
Ambassador to the U.S. (also accredited to the UN in New York)--Claudia Fritsche
Permanent Representative to the UN--Christian Wenaweser

Liechtenstein maintains an embassy in the United States at 1300 Eye Street, NW, Washington, D.C. 20005, tel. (202) 216-0460.

ECONOMY
Since the signing of the Customs Treaty in 1924, Liechtenstein and Switzerland have represented one mutual economic area. Therefore, the borders between those states are open. The country also uses the Swiss franc as its national currency, and Swiss customs officers secure its border with Austria.

Liechtenstein is a member of EFTA, and joined the European Economic Area (EEA) in 1995 in order to benefit from the EU internal market. The liberal economy and tax system make Liechtenstein a safe, trustworthy, and success-oriented country for private and business purposes, especially with its highly modern, internationally laid-out infrastructure and nearby connections to the whole world.

The Principality of Liechtenstein has gone through economic and cultural development in the last 40 years like no other Western country. In this short period, Liechtenstein developed from a mainly agricultural state to one of the most highly industrialized countries in the world.

Besides its efficient industry, there also is as a strong services sector. Four out of ten employees work in the services sector, a relatively high proportion of whom are foreigners, including those who commute across the border from the neighboring states of Switzerland and Austria. Industrial exports doubled in 10 years from $1.4 billion (SFr. 2.2 billion) in 1990 to $2.9 billion (SFr. 4.6 billion) in 2000, but later dropped to $1.8 billion (SFr.2.8 billion) in 2002. Liechtenstein exports 12.7% of its goods to Switzerland, 42.1% to the EU, and 45.2% to the rest of the world. It imports more than 90% of its energy requirements. The industry sector contributes 40% of the country's GDP, followed by banking and finance (30%), services (25%), and agriculture (5%).

In 2002, the United States was Liechtenstein's the third most important trading partner, with $334 million (SFr. 518 million) worth of imports and SFr.44.5 million exports. Germany is the most important, with total trade worth $747 million (SFr. 1.1 billion,) and Austria second with $454 million (SFr. 705 million). Although Switzerland is an important trading partner, trade statistics are unavailable because both countries share a customs union. Some 5% of the country's revenues are invested in research and development, one of the driving forces behind Liechtenstein's successful economy. Total research and development spending in 2000 rose by 20.7% to about $149 million (233 million francs).

The Principality of Liechtenstein also is known as an important financial center, primarily because it specializes in financial services for foreign entities. The country's low tax rate, loose incorporation, and corporate governance rules 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. The same factors made the country attractive and vulnerable to money launderers, although late 2000 legislation has strengthened regulatory oversight of illicit funds transfers.

Liechtenstein has chartered 17 banks, three non-bank financial companies, and 71 public investment companies, as well as insurance and reinsurance companies. Its 270 licensed fiduciary companies and 81 lawyers serve as nominees for, or manage, more than 75,000 entities (primarily corporations, institutions, or trusts), most for non-Liechtenstein residents. About 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
Defense is the responsibility of Switzerland.

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.

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

U.S. Ambassador--Pamela Willeford
Deputy Chief of Missioni--Jack Zetkulic

The U.S. Embassy in Switzerland is at Jubilaeumsstrasse 93, 3005 Bern, Switzerland, tel: (41) (31) 357-7011.

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



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