Liechtenstein 2016 Country Review
2016 Country Review
Table of Contents
Chapter 1 1
Country Overview 1
Country Overview 2
Key Data 4
Liechtenstein 5
Europe 6
Chapter 2 8
Political Overview 8
History 9
Political Risk Index 17
Political Conditions 10
Political Stability 32
Freedom Rankings 47
Human Rights 59
Government Functions 61
Government Structure 63
Principal Government Officials 66
Leader Biography 69
Leader Biography 69
Foreign Relations 72
National Security 75
Defense Forces 76
Chapter 3 78
Economic Overview 78
Economic Overview 79
Nominal GDP and Components 85
Population and GDP Per Capita 87
Real GDP and Inflation 88
Government Spending and Taxation 89
Money Supply, Interest Rates and Unemployment 90
Foreign Trade and the Exchange Rate 91
Data in US Dollars 92
Energy Consumption and Production Standard Units 93 Energy Consumption and Production QUADS 94
World Energy Price Summary 95
CO2 Emissions 96
Agriculture Consumption and Production 97
World Agriculture Pricing Summary 99
Metals Consumption and Production 100
World Metals Pricing Summary 102
Economic Performance Index 103
Chapter 4 115
Investment Overview 115
Foreign Investment Climate 116
Foreign Investment Index 118
Corruption Perceptions Index 131
Competitiveness Ranking 143
Taxation 152
Stock Market 152
Partner Links 153
Chapter 5 154
Social Overview 154
People 155
Human Development Index 156
Life Satisfaction Index 159
Happy Planet Index 171
Status of Women 180
Global Gender Gap Index 182
Culture and Arts 192
Etiquette 193
Travel Information 194
Diseases/Health Data 203
Chapter 6 209
Environmental Overview 209
Environmental Issues 210
Environmental Policy 210
Greenhouse Gas Ranking 212
Global Environmental Snapshot 223
Global Environmental Concepts 234 International Environmental Agreements and Associations 248
Appendices 273
Bibliography 274 Liechtenstein
Chapter 1
Country Overview
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Liechtenstein
Country Overview
LIECHTENSTEIN
The principality of Liechtenstein is a microstate measuring just 62 square miles and home to a population of about 35,000, making it one of the world's smallest countries. Tucked away in the Alps between Austria and Switzerland, Liechtenstein is located at the crossroads of Europe. Early inhabitants of Liechtenstein included Celts, Romans, and Alemanni, but the modern population is fairly homogenous with predominantly Germanic roots.
Liechtenstein part of Charlemangne's empire in the late 700s and was then in 1699, Prince Johann
Adam Andreas of Liechtenstein purchased the County of Schellenberg, and soon thereafter, in
1712, the County of Vaduz.
The nation state of Liechtenstein was established within the Holy Roman Empire in 1719.
Occupied by both French and Russian troops during the Napoleonic wars, Liechtenstein claimed its independence in 1806 , and joined the Germanic Confederation in 1815.
Liechtenstein became fully independent in 1866 when the Confederation dissolved. Until the end of World War I, it was closely tied to Austria, but the economic devastation caused by that conflict forced Liechtenstein to enter into a customs and monetary union with Switzerland.
Since World War II (in which Liechtenstein remained neutral), the country's low taxes have spurred outstanding economic growth. Despite its small size and limited natural resources, Liechtenstein has developed into a prosperous, well-diversified and highly industrialized economy. Low business taxes and easy incorporation rules have attracted many so-called letter-box companies to establish nominal offices in Liechtenstein. Through the monetary and customs union, Liechtenstein is fully integrated with Switzerland and it uses the Swiss franc as its national currency.
In 2000, shortcomings in banking regulatory oversight resulted in concerns about the use of financial institutions for money laundering. However, Liechtenstein implemented anti-moneylaundering legislation and a Mutual Legal Assistance Treaty with the United States that went into effect in 2003.
The country is also a member of the European Economic Area and as a result, benefits from trade with European Union members.
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Liechtenstein
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Key Data
Key Data
Region: Europe
Population: 37624 continental; cold, cloudy winters with frequent snow or rain; cool to moderately warm, cloudy humid.
Climate:
Languages: German (official) Alemannic dialect
Currency: 1 Swiss franc (SwF) = 100 centimes
Holiday: Assumption Day, August 15
Area Total: 160
Area Land: 160
Coast Line: 0
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Liechtenstein
Country Map
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Liechtenstein
Europe
Regional Map
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Liechtenstein
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Chapter 2
Political Overview
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Liechtenstein
History
History in Brief
The area of the present-day Principality of Liechtenstein has been inhabited since approximately
4000 B.C.E. The Alemanni (or Alemannics) settled in the area between 300 and 700 C.E.
As mentioned in the "government" section, the present Principality of Liechtenstein is composed of two regions, the "Oberland" (Upper Country or region) and the "Unterland" (Lower Country or region). Prior to Liechtenstein becoming a principality, these two areas were known as the County of Vaduz (Upper County), formed in 1342, and the County (or Lordship) of Schellenberg (Lower
County).
In 1699, Prince Johann Adam Andreas of Liechtenstein purchased the County of Schellenberg, and soon thereafter, in 1712, the County of Vaduz.
In 1719, the prince declared the area the "Principality of Liechtenstein." In this way, the country acquired its present name. Possession of this territory entitled the prince to membership in the Assembly of Princes at the Imperial Court of the Holy Roman Empire.
In 1806, the principality became a member of the Rhenish Confederation (or Confederation of the Rhine), and in 1815 a member of the German Confederation.
In 1862, a Diet (parliament) was created to represent the people of the principality.
In 1866, the German Confederation dissolved, changing the status of the principality to that of an independent state. As such, Liechtenstein became a fully sovereign entity at that time. th
During the 20 century, the principality retained its sovereignty, maintaining neutrality during
World War I and II. Liechtenstein signed customs treaties, first with Austria and later with
Switzerland.
The treaty with Austria was dissolved shortly after World War I -- in 1919 -- when the Hapsburg monarchy of Austria was abolished. Indeed, Switzerland then replaced Austria as the Liechtenstein Review 2016 Page 9 of 286 pages
Liechtenstein representative of Liechtenstein's interests abroad. Meanwhile, the customs treaty with Switzerland was enacted and put into effect in 1923. As well, in 1921, Liechtenstein adopted the Swiss currency.
It was only after World War II that Liechtenstein was able to move from a primarily agrarian economy to an industrialized and service-sector oriented economy.
Earlier, in 1938, Prince Franz Josef II ascended to the throne to rule the country. He handed executive power to his son, Crown Prince Hans Adam II in 1984. In that very year, women were granted the right to vote in national elections following a referendum.
Five years later, the head of state died. The current head of state, Prince Hans Adam II, succeeded
Prince Franz Josef II in 1989. As noted above, Prince Hans Adam II had been the executive leader of the country since 1985.
In 1990, Liechtenstein joined the United Nations and a year later, it joined the European Free
Trade Association.
In 2003, Liechtenstein voted to expand the princely powers, thus changing the political landscape of the country.
Supplementary sources include: FirstLink to the Principality of Liechtenstein. History of the P r i n c i p a l i t y o f L i e c h t e n s t e i n . 2 0 0 1 . U R L :
Principality of Liechtenstein.
Permanent Mission to the United Nations. "Information about Liechtenstein and Links to
Related Sites." 2001. URL:
Note on History: In certain entries, open source content from the State Department Background
Notes and Country Guides have been used. A full listing of sources is available in the Bibliography.
Political Conditions
Historically, there have been two main political parties in Liechtenstein, the center-right
"Fortschrittliche Bürgerpartei Liechtensteins" (Progressive Citizens' Party of Liechtenstein or
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Liechtenstein
FBPL), founded in 1918, and the conservative "Vaterländische Union" (Fatherland/Patriotic Union or VU) founded in 1936. (The VU is a continuation of the People's Party - which was also founded in 1918.)
More recently, Liechtenstein has had three main political parties, with the advent of the "Freie
Liste" (Free List or FL), founded in 1985, and focused primarily on environmental issues.
In the parliamentary elections (held on Jan. 31, and Feb. 2, 1997), the Fatherland/Patriotic Union
(VU) won 13 seats; the Progressive Citizens' Party won 10 seats; and the Free List won two.
Following these elections, the government was controlled by the Fatherland/Patriotic Union, and headed by Mario Frick. The new head of government was distinguished from his compatriots across the continent having been elected as the youngest prime minister in Europe at the age of only 28.
The parliamentary elections, held on Feb. 9 and 11, 2001, precipitated a change in government.
Winning nearly 50 percent of the vote, the Progressive Citizens' Party took 13 seats to the Fatherland/Patriotic Union's 41.1 percent and 11 seats. The Free List's 8.8 percent was only sufficient for one seat. After the elections, in April 2001, the Progressive Citizens' Party formed a government led by Otmar Hasler.
The most pressing domestic and foreign policy issue faced by the Hasler government centered around an unflattering June 2000 Organization for Economic Development (OECD) report listing
Liechtenstein as one of 35 "tax havens." The OECD expressed concern about small states that allow non-resident individuals and enterprises to pay little or no taxes, and then fail to provide financial information to those individuals' and enterprises' countries of origin. The OECD has promised to allow its member states to apply economic sanctions to countries that fail to comply with a list of tax and financial information disclosure reforms. In June 2000, these alleged tax havens were given one year to comply with the OECD's reform proposals. In July 2001, the OECD published a list of those states which had not yet taken steps towards such compliance.
In addition to the OECD report, the Financial Action Task Force on Money Laundering (FATF), a watchdog organization established over 10 years ago by the Group of Seven (G-7), also listed
Liechtenstein as a potential money-laundering center and tax haven due to its bank secrecy rules.
In early February 2001, the FATF, while noting Liechtenstein's progress toward compliance, had not yet removed Liechtenstein (or any other of the 15 "Non-Cooperative Countries and Territories") from its list.
The previous government, led by Mario Frick, had promised to implement the reforms necessary to bring Liechtenstein's financial regulatory practices into compliance with both the OECD and FATF requirements, and, in September 2000, had seen through parliament several laws designed to do so. Whether or not the Hasler government would continue along this path was yet to be
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By April 2002, however, Liechtenstein was threatened with sanctions when the OECD included the country on a select list of seven states that had failed to comply with requisite standards of financial transparency and effective exchange of information. Clearly, this issue continues to be the dominant matter facing Liechtenstein today.
Meanwhile, also in 2002, Liechtenstein filed a lawsuit against Germany in the International Court of Justice over losses suffered during World War II as a result of Nazi policies. At issue is the fact that artifacts, property, land and other possessions owned by the monarchy had been looted or siezed by the Nazis during World War II. As such, compensation is being demanded. The lawsuit cites a verdict in 1998 which declared that all such possessions confiscated, siezed or looted, regardless of their location, should be treated as part of the war reparations process. The case will likely take on more prominence in Europe over the course of the next few years.
In 2003, the people of the kingdom of Liechtenstein voted on whether or not to expand the powers of the monarchy. Prior to the referendum, Crown Prince Hans Adam II had the right of a princely veto, the right to dissolve parliament and call early elections. Laws could not be passed without his consent, and as such, he was already one of the most powerful monarchs in Europe.The Crown
Prince wanted these powers to be further consolidated even though political critics said that such a change would transform the country into a dictatorship. Some critics also described the proposals outlined by the Crown Prince as a regression from the original 1921 constitution, which was hardly a progressive document to begin with.
Meanwhile, the country's former prime minister, Mario Frick, wondered why his fellow citizens would want to relinquish their democratic rights, when people in other countries fight for these very freedoms. Sigvard Wolhwend of the Democratic Secretariat Party cautioned that granting the prince more power could pontentially transform the country into a dictatorship. Regardless, the Crown Prince said that he would leave his castle at Vaduz and move to his home in Austria if the referendum went against him.
While people were not keen on the notion of an absolute monarchy, they did not want to lose the historical institution either. The country has been typically conservative, with the right of suffrage for women only coming into being in the mid-1980s. As such, the notion of abolishing the monarchy is, in some ways, an anathema to the citizenry. Indeed, even those people who are not in support of the Crown Prince's desire for further power, often describe themselves as staunch royalists. In some core way, the character and identity of the people of Liechtenstein is connected with the legacy of the monarchical establishment.
At the political level, the implications of increased princely power would have an effect on
Liechtenstein's membership in the Council of Europe's Parliamentary Assembly, where all
Liechtenstein Review 2016 Page 12 of 286 pages Liechtenstein members are required to be democracies. Passage of the referendum in favor of Hans Adam II would mean that Liechtenstein would be at great risk of being dismissed from the council.
In March 2003, the results of the referendum showed that nearly two-thirds of Liechtenstein's electorate agreed to vote in support of Hans-Adam II's demands for increased political power. 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.
Regardless, in the latter part of 2003, Crown Prince Hans-Adam declared he would hand over monarchical power to his son, Prince Alois, in 2004 while also maintaining his position as the head of state. The scheduled date for the handover of power was Aug. 15, 2004, which also happened to be Liechtenstein's national holiday, also known as "Assumption Day." Indeed, on that very day,
Prince Alois assumed day-to-day running of Liechtenstein while Crown Prince Hans-Adam retained his title of head of state.
In February 2005, the international scene came to the fore when the International Court of Justice invalidated Liechtenstein's claim for damages from Germany over assets it claimed were handed over to Czechoslovakia in 1945.
On March 13, 2005, parliamentary elections were held. Election results showed that Otmar
Hasler's center-right "Fortschrittliche Bürgerpartei Liechtensteins" (Progressive Citizens Party of Liechtenstein or FBPL) won the plurality of seats. As such, it was set to return to power, albeit within the context of a coalition with the conservative "Vaterländische Union" (Fatherland/Patriotic
Union or VU). The actual results were as follows: Progressive Citizens' Party (FBPL) garnered
48.7 percent of the votes cast and 12 seats; Fatherland/Patriotic Union (VU) took 38.2 percent and 10 seats; and the Freie Liste or Free List acquired 13 percent and 3 seats.
Also in the first part of 2005, the findings of a government-commissioned report on the relationship between banks in Liechtenstein and the Nazis during World war II were made released. The report found that dealings between the two parties showed nothing problematic. While, the report acknowledged that Crown estates in Austria utlized slave labor from Nazi concentration camps, it concluded that Liechtenstein acted more as a bystander rather than an actual perpetrator of this activity.
In late 2005, a referendum was held on the controversial issue of abortion. Prior to the vote,
Catholic Archbishop Wolfgang Haas, working with several pro-life groups, worked to push through a constitutional amendment to completely ban the procedure. According to the law prior to the referendum, abortion in Liechtenstein was treated as illegal, however, there were exceptions in cases of unwed and underage mothers, and in cases where continuing a pregnancy would present a serious health risk for the mother. The referendum results in this predominantly Catholic country indicated a strong endorsement by the public for the legalization of abortion in the early
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Liechtenstein.
In mid-2006, Liechtenstein reached a major benchmark after two centuries. Indeed, the country celebrated 200 years of sovereignty since the break-up of the historic Holy Roman Empire in
1806.
At the close of the year, the country's borders were measured and the findings suggested that tiny
Liechtenstein was larger than previously believed. Indeed, modern measuring methods showed that the country's borders were longer by 1.2 miles (1.9 kilometers). As a results, the borders were now measured to be 48.3 miles (77.9 kilometers), and its area was now 62 square miles (160 square kilometers). Maps and national statistics were accordingly adjusted.
In March, 2007, the Swiss Army accidentally entered Liechtenstein's terrain during routine training exercises in the Alpine forests of the region. Once the blunder was discovered -- two kilometers after crossing the border dividing Switzerland and Liectenstein -- the Swiss Army retreated. The government of Liechtenstein responded by dismissing the matter, saying via a spokesperson, "It's not like they invaded with attack helicopters." More than a decade earlier, Swiss army rockets went astray and landed in Liechtenstein's terrain. That incident was more problematic since the rockets set fire to the forest and resulted in Switzerland having to compensate Liechtenstein for the destruction of the natural environment.
In August 2007, Andorra, Liechtenstein and Monaco were on the "blacklist" or "The List of Uncooperative Tax Havens" by the Organization for Economic Co-operation and Development(OECD).
In February 2008, Liechtenstein became embroiled in a controversy when Germany decided to pursue taxpayers trying to avoid their tax obligations but depositing money into tax havens, such as
Liechtenstein. At issue was Germany's decision to purchase data -- at a price of five million euro
-- from an informant in Liechtenstein, aimed at investigating cases of tax evasion. But the matter resulted in a diplomatic row when the micro-state's monarch, Prince Alois, accused Germany of violating the law by buying the data. Liechtenstein authorities said the informant was a criminal.
To these ends, the monarch said, "Germany will not be able to solve the problems it has with its taxpayers by attacking Liechtenstein." With the threat of a diplomatic imbroglio on the horizon,
Liechtenstein's Prime Minister Otmar Hasler traveled to Berlin to meet German Chancellor Angela
Merkel.
In October 2008, at an OECD meeting in Paris, France and Germany led a charge, along with 15 other countries, to draw up a new "blacklist" of tax havens. Specifically, Germany and France urged the OECD to add a number of countries to its "blacklist," charging that there were several countries that were tacitly encouraging tax fraud. Accordingly, such countries were faced with the Liechtenstein Review 2016 Page 14 of 286 pages Liechtenstein prospect of possible sanctions.
At issue has been the allegation that there are several more countries across the globe where undeclared funds are concealed, and where unrelegated financial activities take place (such as nonregulated hedge funds). Increased attention on such matters has gained steam in the wake of the global financial crisis.
For its part, Liechtenstein has argued that it has sovereignty over its tax policy. But in the first part of 2009, in the face of increased international pressure, the principality said that it would conform to international standards of tax reporting. In a statement, the principality of Liechtenstein said it would accept OECD's standards and that it would support international measures against noncompliance with tax laws. In response, German Chancellor Angela Merkel said, "Every product, every actor and every place in the world must be transparent.