Perched in the Alps, Liechtenstein is rare among small states in having both a thriving banking sector and a well-diversified manufacturing economy. It is closely allied to Switzerland, which handles its foreign relations and defense. Life in Liechtenstein is stable and conservative.The traditional secrecy surrounding the country's financial industry, and low taxes, make it home to many overseas trusts, banks, and investment companies.

Liechtenstein's role as a financial center accounts for the many foreign residents (over 35% of the population), of whom half are Swiss and the rest mostly German. The high standard of living results in few ethnic or social tensions. Family life is highly traditional; women received the vote only in 1984, after much controversy. A proposal to enshrine equal rights for women in the constitution was rejected in a referendum in 1985 by a large majority and only finally passed in 1992.

Strengths

Stability and customs union with Switzerland make Liechtenstein a favored tax haven; its lack of EU membership makes the banking sector less vulnerable to future changes in EU banking laws. The economy is well diversified; chemicals, furniture, coatings for the electro-optical industry, construction services, and precision instruments are all thriving sectors.

Weaknesses

Very few. Need to balance integration with other countries with safeguarding economic independence.

Between 1938 and 1997 the VU and the FBP alternated as coalition leaders, except briefly in 1993. This partnership ended in 1997 when Mario Frick, at 28 Europe's youngest premier, formed a VU-only government. In elections in 2001 the FBP under Otmar Hasler overtook the VU. Referendums have increasingly been used to decide policy issues.

Liechtenstein effectively gave up control of its external relations in 1924 when it signed a Customs Union Treaty with Switzerland. This agreement requires Swiss approval for any treaty arrangements between Liechtenstein and a third state. Liechtenstein became a member of the UN only in 1990. It joined EFTA and the EBRD in 1991, and has been a participant in the EEA since 1995. However, Swiss rejection of EU membership in 1992 effectively ended any prospect of Liechtenstein joining the EU in the foreseeable future.

There has been no standing army since 1868, and there is only a small police force. De facto protection is provided by Switzerland. In theory, any male under 60 is liable for military service during a national emergency, although this law has never been invoked.

Liechtenstein has to import most of its energy. Almost all of its electricity comes from German power plants.

Protection of Liechtenstein's alpine scenery is high enough on the political agenda for one of the five councillors, or ministers, to have responsibility for the environment. As in Switzerland, the greatest worry is the effect of high rates of car use and of through traffic. However, a 1988 trial in providing free public bus transportation proved a failure, as Liechtensteiners remained firmly wedded to their automobiles.

Public transportation in Liechtenstein is mostly by the postal bus network. The single-track railroad has few stops. Zürich, a two-hour drive away, is the nearest airport.

Although clinics and hospitals are few, the health system provides advanced care. Many Liechtensteiners have private health insurance arrangements, so that they have access to Swiss medical expertise and facilities as well as their own.

Education, modeled on the German system, includes two types of school at secondary level – the more academic Gymnasium and the Realschule. Liechtenstein has no university; students go on to colleges in Austria, Switzerland, or Germany, or to business schools in the USA.

Crime is a minor problem, a result of the relatively even distribution of wealth and high average living standard. Liechtenstein has also taken great care to protect its tax-haven status by careful regulation of its financial sector. It has avoided major scandals, and took steps in 2000 to tighten precautions against the growing problem of money laundering.

Unlike other tax havens, Liechtenstein displays a more conservative prosperity. Private deposit accounts are not a key part of its banking business, but an increase in money-laundering activities and the country's appearance on a blacklist of financial centers led to a ban on anonymous accounts in mid-2000.

Liechtenstein's alpine scenery attracts skiers in the winter, and climbers and hikers in the summer.

In 1719 Liechtenstein became an independent principality of the Holy Roman Empire.

• 1924 Customs union with Switzerland.
• 1990 Joins UN.
• 1995 Joins EEA.
• 1997 End of VU–FBP coalition dominant since 1938. Mario Frick heads VU government.
• 2001 FBP wins majority in elections; Otmar Hasler premier.