Liechtenstein

Area 62.4 square mi (160 square km)
Population 37,290 2014
Capital Vaduz
Highest Point 8,577 ft (2,599 m)
Lowest Point 1,419 ft (430 m)
GDP $5.488 billion 2012
Primary Natural Resources hydroelectric potential.

ONE OF WESTERN Europe's five microstates, the story-book principality of Liechtenstein is in reality one of the few “absolutist” states in the world, thanks to a favorable referendum voting extensive powers to the ruling sovereign in March 2003. His Serene Highness, Prince Hans-Adam II von und zu Liechtenstein now has more political prerogatives than any other monarch in Europe.

Sandwiched between the Swiss cantons of St. Gallen to the west and Graubunden to the south and the Austrian province of Vorarlberg to the east, Liechtenstein's history has naturally been closely linked to its larger neighbors. The family had served the Habsburgs in AUSTRIA for centuries, and in fact the family derives its name from its main castle just south of Vienna. Prince Johann Adam bought the county of Vaduz and the adjacent lordship of Schellenberg in 1699 and 1712, and the two territories were united as a fully independent member of the Holy Roman Empire in 1719. But the land itself was of secondary importance to the family: no sovereign prince of Liechtenstein even visited until the middle of the 19th century.

When the Holy Roman Empire fell apart thanks to Napoleon in 1806, Liechtenstein fell between the cracks and was not consolidated into one of the larger German states. Successive princes maintained their independence and forged a beneficial customs union with Austria in 1852. After the collapse of the Austro-Hungarian Empire, however, the princes turned west and formed a similar customs and monetary union with SWITZERLAND in 1923, which is still in effect today. The princely family still owns large estates in Austria and lays claim to numerous others in the CZECH REPUBLIC that were confiscated by the communists (equal to ten times the size of the principality itself). Still, the prince's wealth is estimated at more than $2 billion.

The principality—15 mi (26 km) long, and an average of 4 mi (6 km) wide—lies on the eastern bank of the RHINE RIVER, between its emergence from the high Alpine valleys of Switzerland and Lake Constance to the north. Two canals running on either side of the river through this valley maintain its water levels to reduce risk of spring floods. The eastern third of Liechtenstein is divided from the rest by a range of mountains, forming the upper Samintal, or valley of the Samina River, which runs northward into the Ill in Austria, which in turn joins the RHINE just a few kilometers north of Liechtenstein. To the east and south of this valley rise the much greater Alpine heights dividing the country from Austria, including a number of peaks above 8,250 feet (2,500 m).

The main town, Vaduz, has a population of about 5,000. High above the town, the prince's castle, dating from the 14th century, boasts one of the largest private art collections in the world and is a major tourist attraction. Much of this art collection has recently been transferred to Vienna's newest major art gallery, the restored Liechtenstein Palace, opened to the public in March 2004. Liechtenstein itself has been transformed since World War II from a sleepy agricultural community to a modern industrialized society with one of the world's highest standards of living.

Revenue is generated locally through skiing and the sale of rare stamps, but it is the income from numerous so-called post-office-box companies, attracted by low business taxes, that has boosted the national economy (providing as much as 30 percent of state revenues). Concerns over tax evasion schemes and money laundering, however, have recently caused increased pressure from the EUROPEAN UNION and the principality's authorities.