Monaco is a tiny enclave on the French Côte d'Azur. Its destiny changed radically in 1863, when Prince Charles III, after whom Monte Carlo is named, opened the casino. Today, Monaco is a lucrative banking and services center, as well as a tourist destination. Prince Rainier's marriage to film star Grace Kelly, and some astute management of the economy, successfully transformed Monaco into a center for the international jet set. In 1962, the prince's absolute authority was abolished by a new, democratic constitution.

Less than a fifth of Monaco's residents are Monégasque. Around half are French, the rest Italian, American, British, and Belgian. Monégasques enjoy considerable privileges, including housing subsidies to protect them from Monaco's high property prices, and the right of first refusal before a job can be offered to a foreigner. Women have equal status, but only acquired the vote in the constitutional changes of 1962.

Strengths

Strict banking confidentiality and low taxes attract billions of dollars of overseas deposits. Strong tourism sector. Assets managed by Monaco banks increased by 18% a year in the late 1990s. No formal debt and reserves of over 2.3 billion euros. Very low unemployment.

Weaknesses

Continuing vulnerability to money laundering despite revised banking secrecy laws under the 1994 accord with France obliging banks to furnish details of suspicious accounts. Subject to fluctuations of French and Italian economies. Dependence on VAT for 55% of revenues. Pressure from EU states to end privileged banking and tax laws. Total dependence on imports because of lack of natural resources.

The Grimaldi princes have been hereditary rulers of Monaco for more than 700 years. Prince Rainier III renounced absolute rule in 1962 but retains considerable power. The executive minister of state is appointed by the Prince from a list of French diplomats. National Council elections – based on personalities rather than parties – were last held in 1998.

A key concern is to protect both banking secrecy and the liberal tax regime from EU regulation, though the principality has adopted the euro. France is particularly critical, and French citizens have been banned from banking in Monaco since 1962.

Monaco has no armed forces and no defense budget. France, as the protecting power, bears responsibility for the defense of the principality.

Monaco has no strategic resources and imports all its energy from France. It has no agricultural land.

Monaco has built the most extensive underground car parking facilities in the world to tackle congestion. The quality of the built environment around the harbor occasionally arouses local passions. Important populations of red coral are under threat from land reclamation and pollution.

An underground railroad system connecting Cap d'Ail in France, opened in 1999, meant that 2% of Monaco's area could be reclaimed. Access to Monaco is mainly by land, although Air Monaco provides helicopter flights from Nice airport.

Most medical care is provided by private health insurance. Doctors train in France. The Princess Grace Hospital can serve 60,000 people, also catering for patients from outside Monaco.

The education system is essentially the same as that of France, with students studying for the baccalauréat exam. Most go on to university in France, but then return to claim good jobs in Monaco. The Catholic Church exerts considerable influence and is still responsible for primary schooling.

Low crime rates make it safe for the rich to sport their furs and jewelry in public. In late 1998 the appeals court upheld Monaco's first conviction of an individual for money laundering.

Monaco's image abroad has changed dramatically since Prince Rainier acceded in 1949. From being considered a simple gambling spot, it is now ranked as one of the world's most glamorous international jetset destinations. In part, this was the result of Rainier's wedding to Grace Kelly, then a leading Hollywood star, which brought Monaco to the attention of US high society. More important was Rainier's work in turning Monaco into a major tax haven and an up-market resort, by making the most of its Mediterranean coastal location. Many tax exiles have taken up residence, among them Luciano Pavarotti and Wall Street investment guru Bob Beckman.

Huge numbers of tourists, greatly outnumbering the inhabitants, are attracted to Monaco, most coming from France and Italy. Almost all are day-trippers drawn by the casinos and Monaco's conspicuous high society. Around 75% of hotel rooms are classed as "four-star deluxe," and the principality is a particular favorite of wealthy Italians. The Grimaldi Forum conference center, which opened in 2000, hopes to attract more business travelers.

A number of social and sporting events draw particularly large crowds each spring, including the Rose Ball (March), the Tennis Open (April), and the Grand Prix (May).

In 1297, the Grimaldis established themselves as the principality's hereditary rulers.

• 1861 Independent under French protection.
• 1949 Rainier III accedes to throne.
• 1962 Constitution rewritten: end of absolute authority of the prince.
• 1963 Democratic legislative elections held for first time.
• 1982 Princess Grace dies following car accident.
• 2002 Euro introduced.