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Liechtenstein faced renewed criticism for its notoriously opaque banking system, despite measurable steps it had taken in 2001 to make the system more transparent. The United States warned the small principality that Islamic militant groups may be using Liechtenstein's banks to fund their operations. The Organization for Economic Cooperation and Development (OECD) threatened sanctions if financial transparency standards were not met.
Liechtenstein was established in its present form in 1719 after being purchased by Austria's Liechtenstein family. Native residents of the state are primarily descendants of the Germanic Alemani tribe, and the local language is a German dialect.
From 1938 until 1997, the principality was governed by a coalition of the Progressive Citizens' Party (FBP) and the Fatherland Union (VU). The FBP was the senior partner for most of this period. Liechtenstein's constitution, adopted in 1921, has been amended several times.
One of the world's most secretive tax havens, Liechtenstein has in recent years faced accusations that it is a money laundering haven, favored by foreign organized-crime syndicates, including drug cartels and international terrorists. In 2000, the Paris-based Financial Action Task Force (FATF), an international anti-money-laundering group attached to the OECD, listed the country as "noncooperative" for its secrecy laws. The OECD classified Liechtenstein as a "harmful" tax haven. Approximately $63 billion in client money is managed among 17 local banks in Liechtenstein. The FATF blacklisting led to a marked decrease of capital flow into Liechtenstein's banks.
In June 2001, in a determined effort to burnish its image, Liechtenstein established the Institute for Compliance and Quality Management to teach local bankers and lawyers how to identify illegal banking practices. Liechtenstein also took steps to reveal the identity of banking clients.
In April 2002, however, the OECD threatened to impose sanctions against Liechtenstein after including it on a list of seven states that failed to meet financial transparency and information exchange standards. In October, United States Treasury undersecretary Jimmy Gurule visited Liechtenstein to inform it that Islamic terrorists might be taking advantage of its banking secrecy laws to finance their operations.
On the political front, Prince Hans Adam and the government remained in dispute over the degree of the royal family's powers. The prince, one of the few European monarchs whose powers are not largely ceremonial, promotes constitutional reform. He would like sole authority to appoint judges presiding over illegal banking cases. Some members of parliament claim the prince wants to centralize more authority in his own hands. The prince has threatened to arrange a referendum on constitutional reform, saying he will relocate to Austria should he lose the vote. Such a move would raise the question of how Liechtenstein would be governed.
Prince Hans Adam faced a reprimand by the European Court of Human Rights in 1999 for abusing his subjects' freedom of speech. The court fined the prince for refusing to reappoint a judge he had dismissed for suggesting that the Supreme Court, and not the prince, should have the last word in constitutional matters. The prince, who has ruled the principality since 1989, has ignored the legislature on several occasions, most notably when he had the country join the European Economic Area (EEA) despite deputies' doubts.
Parliamentary elections in February 2001 ushered in a new prime minister. Otmar Hasler, head of the FBP, assumed leadership after his party captured 13 out of 25 seats in the unicameral Landtag (parliament). Hasler unseated Mario Frick, prime minister since 1997. Frick's VU party captured 11 seats in the latest elections, with the Free List party (FL) taking one seat.
Liechtenstein's economy is closely intertwined with Switzerland's. Its official currency is the Swiss franc. To reduce the country's economic dependence on Switzerland, Prince Hans Adam led the principality into membership not only in the EEA but also in the United Nations, the European Free Trade Association, the World Trade Organization, and the General Agreement on Tariffs and Trade.
Liechtensteiners can change their government democratically. The prince exercises legislative powers jointly with the Landtag (parliament). He appoints the prime minister from the Landtag's majority party or coalition, and the deputy chief of the five-member government from the minority. Parties with at least 8 percent of the vote receive representation in the parliament, which is directly elected for four years on the basis of proportional representation. The sovereign possesses power to veto legislation and to dissolve the Landtag. Participation in elections and referendums is compulsory.
The government respects freedom of speech. However, Prince Hans Adam faced a reprimand by the European Court of Human Rights in 1999 for abusing his subjects' freedom of speech. The court fined the prince for refusing to reappoint a judge he had dismissed for suggesting that the Supreme Court, and not the prince, should have the last word in constitutional matters. The prince, who has ruled the principality since 1989, has ignored the legislature on several occasions, most notably when he had the country join the EEA despite deputies' doubts.
Two daily newspapers are published, each representing the interests of one of the two major political parties, as is one weekly newsmagazine. There are two television stations, one owned by the state and one private. While there is only one private radio station, residents regularly receive radio and television broadcasts from neighboring countries.
In 1998 and 1999, Liechtenstein received a high number of asylum seekers who were given temporary protection. The number of asylum seekers reaches almost 2 percent of the total population of Liechtenstein. A strict policy prevents significant numbers of second-and third-generation residents from acquiring citizenship.
Although Roman Catholicism is the state religion, other faiths are practiced freely. Roman Catholic or Protestant religious education is compulsory in all schools, but exemptions are routinely granted.
Liechtensteiners enjoy freedom of association. The principality has one small trade union. Workers have the right to strike, but have not done so in more than 25 years. The prosperous economy includes private and state enterprises. Citizens enjoy a high standard of living.
The independent judiciary, subject to the prince's appointment power, is headed by the Supreme Court and includes civil and criminal courts, as well as an administrative court of appeals and a state court to address questions of constitutionality.
Although only narrowly endorsed by male voters, the enfranchisement of women at the national level was unanimously approved in the legislature in 1984 after defeats in referenda in 1971 and 1973. By 1986, universal adult suffrage at the local level had passed in all 11 communities. In the 1989 general elections, a woman won a Landtag seat for the first time. Three years later, a constitutional amendment guaranteed legal equality. Women occupy approximately 12 percent of Liechtenstein's parliamentary seats.