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

The flag of Liechtenstein is two equal horizontal bands of blue (top) and red with a gold crown on the hoist side of the blue band.

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

People
Nationality: Noun--Liechtensteiner(s), adjective--Liechtenstein.
Population (2006): 33,987, of which 34.3% 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: 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); Heir Apparent 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: Otmar Hasler (since April 5, 2001). Cabinet: Five cabinet members. The cabinet is 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 four-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.

Economy
GDP: U.S. $3.52 billion (SFr.4.28 billion).
Annual growth rate: 2.6%.
Unemployment: 2.3% (or 689 individuals).
Avg. inflation rate: 0.6%.
Agriculture (7% of GDP): Wheat, barley, corn, potatoes, livestock, dairy products.
Industry (40% of GDP): Electronics, metal manufacturing, textiles, ceramics, pharmaceuticals, food products, precision instruments.
Services (26% of GDP): Financial, tourism.
Trade (2005): Exports--$2.6 billion (+0.8% over 2004). Main products--small specialty machinery, dental products, stamps, hardware, pottery. Major markets--U.S., Germany, Switzerland, France, Italy, Taiwan, Japan, Austria, and United Kingdom. Imports--$1.5 billion (+1.5% over 2004). Main products--machinery, metal goods, textiles, foodstuffs, motor vehicles. Major suppliers--EU countries, Switzerland.

HISTORY
The Liechtenstein Family of Austria 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, 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 the 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 World Trade Organization (WTO) in 1995.

GOVERNMENT
According to the Constitution, the government is a collegial 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.

Amendments to the constitution and new laws 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 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-�-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 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 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 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 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 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.

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. 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 2005-2009 legislature period of office one Councilor and three deputies are women.

From 1938 to 1997, Liechtenstein had a coalition government and 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. In 2001, the Progressive Citizen's Party held the majority, and provided all the members of the government. The minority parties, as opposition parties, acted as a check on the government in parliament and on parliamentary commissions.

In the March 2005 parliamentary election a new political party, the Free List, earned enough votes to gain three seats, preventing either of the two larger parties from gaining an absolute majority. A new Parliament was elected and a grand coalition was formed; the two strongest factions, the center-right Progressive Citizens' Party and the center-left Fatherland Union, holding 3 and 2 cabinet seats respectively. There are 25 seats in the Landtag, divided as follows: Progressive Citizen's Party 12, Fatherland Union 10, Free List 3. There are 6 women in the 25-seat Parliament and 1 in the 5-member Cabinet. Women first gained the right to vote in Liechtenstein and a growing number of women are active in politics. Women served on the executive committees of the major parties.

In March 2003, the Liechtenstein electorate endorsed with a decisive margin Prince Hans-Adam II's proposal for a revision of the Liechtenstein Constitution which granted him 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 six 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. The Prince now also has final approval on the appointment of judges, and the State Court loses its key competence to mediate between the Government and the Prince on constitutional matters. In September 2005 an ad-hoc committee of the Parliamentary Assembly of the Council of Europe met with a delegation of the Liechtenstein Parliament in Vaduz for a first round of talks on this change to the constitutional order. The talks are part of a dialogue that the Parliamentary Assembly chose as an alternative to a standard monitoring procedure to assess the constitutional order following the adoption in 2003 of a series of amendments to the Liechtenstein Constitution. A second round of talks in Strasburg and a final report on the results of this dialogue were scheduled for early 2006.

Principal Government Officials

Federal Departments
Otmar Hasler (Head of the Government)--Prime Minister, Government Executive, Finance, Construction and Public Works
Klaus Tschuetscher--Deputy Prime Minister, Economic Affairs, Justice, and Sports
Rita Kieber-Beck--Foreign Affairs, Cultural Affairs, Family and Equal Opportunity
Hugo Quaderer--Education, Social Affairs, Land Use Planning, Agriculture and Forestry
Martin Meyer--Home Affairs, Public Health, Transport and Telecommunications
Robert Walner--Attorney General
Claudia Fritsche--Liechtenstein's Ambassador to the U.S.
Christian Wenaweser--Permanent Representative to the UN.

Liechtenstein maintains an embassy in the United States at 888 17th Street, NW, Suite 1250, Washington, DC 20006. Telephone (202) 331-0590.

ECONOMY
Since the signing of the 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 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 will have 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 to EU projects and subsidies.

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 of time Liechtenstein developed from mainly an agricultural state to one of the most highly industrialized countries in the world.

Besides its efficient industry, there is also 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. Total exports increased from $1.8 billion (SFr. 3 billion) in 2000 to $2.5 billion (SFr. 3.2 billion) in 2005, while total imports increased from $892 million (SFr.1.5 billion) to $1.5 billion (SFr.1.9 billion) during the same period. About 13% of Liechtenstein's goods are exported to Switzerland, 69.3% to the EU, 16% to the U.S. and the remaining share to the rest of the world. Liechtenstein imports more than 90% of its energy requirements. The Liechtenstein industrial sector contributes 40% of the country's GDP, followed by banking and finance (30%), services (25%), and agriculture (5%). Despite Liechtenstein's overall good competitive performance, there is a trend among business to outsource their production in low cost countries.

In 2005, the U.S. was the third most important trading partner for Liechtenstein, with approximately $420 million (SFr. 521 million) worth of exports and $58 million (SFr. 72 million) of imports. Germany was first with a total trade value of $1.7 billion (SFr. 2.1 billion) and Austria second with $1.1 billion (SFr. 1.4 billion). Although Switzerland is an important trading partner, trade statistics are unavailable because both countries are in a customs union. Approximately 5% of the country's revenue is invested in research and development, one of the driving forces of the success of Liechtenstein's economy. The Principality of Liechtenstein is also 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, 3 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), 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
Defense is the responsibility of Switzerland. 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 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.

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. Officials
U.S. Ambassador--Peter Coneway
Deputy Chief of Mission--Carol Urban

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

[This is a mobile copy of Liechtenstein (10/07)]