Capital: Vaduz
Population: 36,000

Political Rights Score: 1 *
Civil Liberties Score: 1 *
Status: Free


In a continued effort to address criticism over lax financial standards, Liechtenstein passed a comprehensive new tax code in July, helping to bring the country's financial legislation into line with European legal standards.

Liechtenstein was established as a principality in 1719 and gained its sovereignty in 1806. From 1938 to 1997, it was governed by a coalition of the Progressive Citizens' Party (FBP) and the Fatherland Union, now the Patriotic Union (VU). The latter party then ruled alone until the FBP won the 2001 elections.

In a 2003 referendum, voters approved a constitutional amendment that granted significantly more power to the monarch, Prince Hans-Adam II. In 2004, Hans-Adam handed his constitutional powers to his son, Hereditary Prince Alois, though the elder prince retained his title as head of state.

In the 2005 elections, the FBP and the VU captured 12 and 10 seats, respectively. A small third party, the Free List, captured 3 seats, forcing the two larger parties to form a grand coalition. FBP leader Otmar Hasler retained his post as prime minister.

In the February 2009 parliamentary elections, the VU won 13 seats and the FBP captured 11, while the Free List took the remaining seat. Prime Minister Hasler was replaced in March by Vice Prime Minister Klaus Tschütscher of the VU, who subsequently formed a coalition government with the FBP.

Liechtenstein, a leading offshore tax haven, has traditionally maintained tight bank secrecy laws. However, the principality in 2009 signed tax information sharing agreements with several countries and agreed to comply with transparency and information-sharing standards outlined by the Organization for Economic Cooperation and Development (OECD). Following a 2009 agreement with the United Kingdom, Liechtenstein passed laws in July 2010 which will oblige those holding offshore accounts in Liechtenstein to declare their assets to tax authorities and pay as much as 10 percent in taxes evaded over the past 10 years.

Political Rights and Civil Liberties

Liechtenstein is an electoral democracy. However, the unelected monarchy won greater authority in 2003, making it the most politically powerful in Europe. The unicameral Parliament (Landtag) consists of 25 deputies chosen by proportional representation every four years. These freely elected representatives determine the policies of the government, but the monarch has the power to veto legislation, dismiss the government, and appoint judges. Voting is compulsory.

Political parties are able to freely organize. Two parties – the VU and the FBP – have dominated politics over the last half-century.

Liechtenstein's politics and society are largely free of corruption, and the country continues to work to build sufficient mechanisms to fight money laundering in its banking system. Due to recent commitments, the OECD removed Liechtenstein from its list of uncooperative tax havens in 2009. Government officials are not legally obligated to disclose their financial assets.

The constitution guarantees freedom of expression and of the press. There is one private television station, and the only radio station is privately held. The two daily newspapers are roughly aligned with the two major political parties. Broadcasts from Austria and Switzerland are available and popular in the country, as are foreign newspapers and magazines. Internet access is not restricted.

The constitution establishes Roman Catholicism as the state religion but protects freedom of belief. Catholic or Protestant religious education is mandatory, but exemptions are routinely granted. All religious groups are tax exempt. The government respects academic freedom.

Freedoms of assembly and association are protected, and the principality has one small trade union. A 2008 law provides civil servants with the right to strike.

Judges are appointed by the prince. Despite controversy over the monarch's expanded powers, Liechtenstein has remained a law-based state with an independent judiciary. Due process is respected, and prison conditions meet international standards. Crime is rare in the country. Switzerland is responsible for its customs and defense.

A third of the population is foreign born. Some native citizens have expressed concern over the growing number of immigrants from non-German-speaking countries. The government has responded by seeking to teach newcomers the language and culture of Liechtenstein in formal integration programs. Foreigners have occasionally been the target of violence by ring-wing groups. In February 2010, a Turkish-owned kebab house was fire-bombed by a right-wing extremist, who was subsequently tried and sentenced to two and a half years in prison. The number of asylum applications received by the country has dropped significantly, with only 105 applications in 2010 compared with 227 in 2009. A report released by the UN Committee against Torture (CAT) in May 2010 noted that asylum seekers' claims do not always receive adequate attention. Among other complaints, the CAT also voiced concern over Liechtenstein's rejection of most applications, as well as reports that government officials have bribed asylum seekers to leave the country. A total of 85 asylum applications were denied in 2010.

Since 1995, Liechtenstein has been a member of the European Economic Area, a free-trade area that links the non-European Union (EU) members of Norway, Iceland, and Liechtenstein with the EU.

Under a 2005 reform, abortion is legal in the first 12 weeks of pregnancy. A 2003 court decision upheld the principle of equal pay for equal work for women, though women are at times excluded from jobs traditionally held by men. Women are underrepresented in the upper levels of business and government, with only 6 women serving in the 25-seat Parliament. Women enjoy equal rights in family law.

* Countries are ranked on a scale of 1-7, with 1 representing the highest level of freedom and 7 representing the lowest level of freedom.

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