Monaco: A State Owned By A Family

by | Jul 24, 2023 | Blog

While Venice has lost its independence, another Mediterranean community founded by Genoese noblemen has survived to this day. This is the Principality of Monaco, which can be exemplary for Free Cities in many respects because of its size, its special relationship with France, and its solutions to the issues of security, immigration, and financing of public expenditure. Some claim that Monaco is already a kind of private state that publishes its figures like a stock corporation and regards its inhabitants as customers. [1]

The civil wars between the Ghibellines and Guelphs in northern Italy led to the expulsion from Genoa of the papal Guelphs and thus also of the Grimaldi family in 1296. On January 8, 1297, the Grimaldi managed to penetrate the fortress of Monaco, which until then had been in Ghibelline hands, and conquer it with their troops in a surprise attack. Since then, the Grimaldi family has ruled Monaco, with only brief interruptions due to foreign occupation. In 1489, Monaco’s independence was formally recognized by the King of France and the Duke of Savoy. As a result, independence was questioned time and again, often by France, which now surrounds Monaco from three sides. Today, Monaco’s sovereignty, including its coastal waters, is universally recognized. The Principality has been a constitutional monarchy since 1911. Freedom of expression is guaranteed. The prince appoints the government. Since the 1962 amendment to the constitution, there has been a parliament elected in free and secret elections every five years. However, the prince has the right of veto on acts of parliament. In 1993 the country joined the United Nations. [2]

Monaco is a dwarf state with an area of only 2 km². It is home to about 38,000 people, making it the most densely populated country in the world. About 50,000 people work in the principality, most of them daily commuters from France or nearby Italy. They usually cannot afford to take an apartment in Monaco. Despite formal recognition as a sovereign state, the relationship with France occupies a special position that restricts Monaco’s independence to a certain extent. Monaco has concluded several treaties with France over the centuries, defining the relationship between the two countries. Thus, even the last major crisis between the two countries was resolved by treaty. At the beginning of the 1960s, French companies and private individuals increasingly moved their headquarters to tax-free Monaco, although they generated the bulk of their income in France. France then demanded that Monaco impose French taxation on all its inhabitants and companies. The final compromise reached in 1963 provides that persons with French nationality who did not live in Monaco before 1962 should pay taxes in France. In addition, Monaco adopted the French Value Added Tax (VAT) rate and pays part of the VAT to France. The Principality also undertakes to exercise its sovereignty rights in such a way as to safeguard France’s economic and political interests. This also includes not allowing persons to enter who are unwanted in France. In return, France assumes responsibility for Monaco’s external security. [3]

Monaco, with its diversity of cultural, culinary, and sporting offerings, combined with its civility, its history, its splendor, and its reputation as the home of the rich and beautiful, can certainly be regarded as a culmination point of European high culture. There is no shortage of critics, but tourists and day visitors keep coming in droves, and the demand for housing exceeds the supply many times over, which is why property prices are the highest in the world. About 30% of its inhabitants are said to have liquid assets of more than one million US dollars. [4] Monaco is considered the state with the lowest poverty rate and the highest life expectancy worldwide.

In the middle of the 19th century, Monaco was still poor. The population had even declined to 300 people at one time. Only with the opening of a successful casino and the railway connection in 1868 did the turnaround come about. When the annual revenues from the casino business financed 95% of the state budget, the prince decided to waive taxes on his subjects from then on. In principle, it has remained so to this day. Monaco does not levy income, inheritance, or capital gains taxes. However, companies that generate the bulk of their income outside Monaco pay corporate taxes. Added to this is the aforementioned value-added tax, which currently accounts for about half of the state budget, which is about one billion euros per year (for only 38,000 people). Revenues from state casinos and hotels today play only a minor role (about 5%), the rest being financed by corporate taxes, property taxes, and other levies. The budget shows a slight surplus and Monaco is not only debt-free but also has liquid reserves of more than two annual budgets. [5]

The Principality has had a customs union with France since 1865, through which it also participates in the EU common market but is not itself a member of the European Union. Monaco uses the Euro as its currency and has also received the right from the EU to mint a certain number of coins itself.

About 80% of the population are foreigners without Monegasque citizenship. People from 139 nations live together peacefully. Monaco has the lowest crime and poverty rate in the world, without border controls and despite tens of thousands of commuters and just as many visitors every day.

How is that possible? The Principality has the highest police density per capita in the world and monitors its entire territory with cameras; there is a police officer and a video camera for every 70 inhabitants. The police have a total strength of 520 people, plus the same number of private security personnel and two paramilitary units (palace guard and fire department). Due to the urban nature of the border with neighboring French municipalities and the high volume of traffic, it would be difficult to carry out strict border controls. Monaco instead monitors incoming vehicles with license plate readers and by visual inspection by police officers posted at the points of entry. Suspicious persons are detected by the camera surveillance and then questioned by patrolmen.

Incidentally, Monaco looks closely at who it brings into the country as a resident. If you want to settle in Monaco, you must also be entitled to reside in France, have proof of an apartment in Monaco (rent or property), have sufficient income or assets to cover your living expenses, as well as a CV and a police clearance certificate from your country of origin for all adult family members. On this basis, an internet search is then carried out and a personal interview with a police officer is conducted. If there are no qualms, Monaco grants a residence permit for one year, which can be extended twice more for one year before a three-year residence permit is granted, etc. This gives Monaco the option of simply not extending the residence permit for dubious or unpleasant new citizens instead of having lengthy legal disputes about the revocation of a residence permit. Monaco has no tolerance for crime.

Convicted non-Monegasques must leave the Principality, possibly after serving a prison sentence, even for minor offences such as shoplifting. [6] It is the combination of all these measures, i.e. the camera surveillance, the strict immigration rules, the deportation of criminals, and the strong police presence, which means that parents in Monaco can send their children out onto the streets at midnight without hesitation. A rare feature in today’s Western cities.

 

 

References:

  1. Cf. also Pamini 2015, 353, who points out that it is precisely the design of Monaco as “Grimaldi Ltd” that achieves better results than a democracy.
  2. https://fr.wikipedia.org/wiki/Histoire_de_Monaco
  3. http://en.gouv.mc/Policy-Practice/Monaco-Worldwide/Agreements-and-Treaties/Treaties-and-bilateral-agreements/Themes/Bilateral-treaties-with-France; relevant are the agreements concluded in 1963. 
  4. www.faz.net/aktuell/wirtschaft/wirtschaftspolitik/reichtum-wo-die-millionaere-wohnen-staedte-ranking-13060176.html
  5. 2016 for the fifth time in a row a surplus was achieved. see Monaco Statistics Pocket 2017, IMSEE Monaco Statistics, p. 13. The reserves are held in the Fonds de Réserve Constitutionnel, Monaco Pocket Statistics, p. 16.
  6. Instructively in addition a report of the French sender M6: https://www.youtube.com/watch?v=E22Bvnf5k2w