The Principality of Liechtenstein is created within the Holy Roman Empire.

A principality, also sometimes referred to as a princedom, represents a unique form of political entity. It can manifest either as a monarchical feudatory – a territory that, while possessing its own ruler, owes allegiance or homage to a larger sovereign state or empire – or as a fully sovereign and independent state. The distinguishing characteristic of a principality is that it is ruled or reigned over by a hereditary monarch holding the title of prince or princess. This definition can also extend to a monarch with another title that is generally understood to fall within the broader, generic meaning of a prince as a ruler of a territory.

Understanding Liechtenstein: Europe's Alpine Microstate

Officially known as the Principality of Liechtenstein (German: Fürstentum Liechtenstein), this German-speaking microstate is nestled within the Alps, strategically located between two prominent European nations: Austria to its east and north, and Switzerland to its west and south. Liechtenstein operates as a constitutional monarchy, with the head of state being the reigning Prince of Liechtenstein.

Geographical Footprint and Demographic Overview

Despite its significant economic standing, Liechtenstein is notably small in physical size. It ranks as Europe's fourth-smallest country, encompassing a modest area of just over 160 square kilometres (approximately 62 square miles). In 2019, its population stood at 38,749 inhabitants. Administratively, the principality is structured into 11 distinct municipalities. Vaduz serves as its capital city, while Schaan holds the distinction of being its largest municipality by population and area.

Liechtenstein holds a unique geographical distinction as the smallest country globally to share borders with two other nations. Furthermore, it is one of only two doubly landlocked countries in the world. This means that not only is Liechtenstein completely surrounded by land, but the countries it borders (Austria and Switzerland) are themselves landlocked, making it entirely surrounded by landlocked countries. The only other nation with this rare geographical characteristic is Uzbekistan.

Economic Prosperity and Financial Sector

Economically, Liechtenstein stands out on the global stage, boasting one of the highest gross domestic products (GDP) per person worldwide when adjusted for purchasing power parity (PPP). This high GDP per capita reflects the exceptional standard of living and economic prosperity enjoyed by its residents.

The country's robust economic health is largely driven by its strong financial sector, which is primarily centred in the capital, Vaduz. This sector is renowned for services such as asset management, wealth management, and trust administration. While Liechtenstein was historically known by some as a "billionaire tax haven," it has made significant strides in recent years to enhance financial transparency and regulatory compliance. As a result of these efforts, the principality is no longer listed on official blacklists of uncooperative tax haven countries.

Beyond finance, Liechtenstein's mountainous Alpine terrain naturally positions it as a popular destination for winter sports, attracting tourists and enthusiasts to its ski resorts and winter activities.

International Relations and European Integration

Liechtenstein actively participates in the international community and maintains close ties with various European bodies. It is a full member of the United Nations (UN), the European Free Trade Association (EFTA), and the Council of Europe, demonstrating its commitment to global and regional cooperation.

While Liechtenstein is not a member of the European Union (EU), it nonetheless enjoys close integration with the EU's economic and travel frameworks. The principality participates in both the Schengen Area, which allows for free movement of people across internal borders, and the European Economic Area (EEA), providing it with access to the EU's single market without requiring full EU membership. Additionally, Liechtenstein shares a deep economic bond with Switzerland, evidenced by a comprehensive customs union and a monetary union, meaning the Swiss Franc (CHF) serves as Liechtenstein's official currency.

Frequently Asked Questions About Principalities and Liechtenstein

What is the difference between a principality and a kingdom?
The primary distinction lies in the title of the ruling monarch. A principality is typically ruled by a prince or princess, whereas a kingdom is governed by a king or queen. Historically, kingdoms were often larger and held more significant political power, while principalities were sometimes smaller territories or semi-autonomous regions within larger empires, though some, like Liechtenstein, are fully sovereign states.
What does "doubly landlocked" mean for a country like Liechtenstein?
A doubly landlocked country is a nation that is completely surrounded by landlocked countries. This means it has no direct access to the ocean, and neither do any of its immediate neighbours. Liechtenstein is bordered by Austria and Switzerland, both of which are landlocked, making Liechtenstein doubly landlocked.
Why is Liechtenstein's GDP per person so high?
Liechtenstein's high GDP per person is largely attributable to its highly developed and specialized financial services sector, which attracts significant international capital. The country also benefits from a low unemployment rate, high levels of foreign investment, and a robust industrial sector, all contributing to its overall economic prosperity and wealth per capita.
Is Liechtenstein part of the European Union?
No, Liechtenstein is not a member of the European Union. However, it maintains very close ties with the EU through its participation in the European Economic Area (EEA), which grants it access to the EU's single market, and the Schengen Area, facilitating free travel within much of Europe.
What is Liechtenstein's relationship with Switzerland?
Liechtenstein shares a very close and unique relationship with Switzerland, rooted in long-standing agreements. This includes a customs union, meaning there are no customs controls between the two countries, and a monetary union, where the Swiss Franc (CHF) is Liechtenstein's official currency. Switzerland also represents Liechtenstein's diplomatic interests in many countries where Liechtenstein does not have its own embassies.