Liechtenstein Unitary state

History and trends

The Principality of Liechtenstein is a constitutional parliamentary Monarchy. Its Constitution was adopted on 5 October 1921.

Its capital is Vaduz and its biggest city is Schaan. According to the World Factbook, Liechtenstein had the world’s highest GDP per capita in 2008. The country also has one of the lowest unemployment rates in the world (2.5% in 2011).

Liechtenstein comprises the former Lordships of Vaduz and Schellenberg. The territory was acquired by the House of Liechtenstein in 1699 and established as a principality by Holy Roman Emperor Charles VI on 23 January 1719. It was part of the Confederation of the Rhine (1806-1814), and then of the German Confederation (1815-1866). It adopted a constitution in 1816 and was closely tied to the Austrian economy until 1918 (customs union in 1851 and monetary union in 1856).

Following World War I, it adopted a new constitution (1921) and a 15-member parliament elected by universal suffrage for a four-year term, and established close economic ties with Switzerland (monetary and customs union in 1923), which takes responsibility for its diplomatic relations.

The principality joined the United Nations (UN) in 1990 and the European Free Trade Association (EFTA) in 1991. At a 1992 referendum, the electorate voted in favour of the country joining the European Economic Area (EEA) – a decision that forced the authorities to review the 1923 agreements with Switzerland so that they were compatible with this commitment. This status was confirmed at a second referendum and entered into force on 1 May 1995.

The European Union accounts for 40% of Liechtenstein’s trade, which has benefited from more open border arrangements. Liechtenstein joined the Schengen Area in 2011.

The country has a monetary and customs union with Switzerland, which manages much of its diplomatic relations.