How well do you know your neighbors? We looked into the Alpine Republic’s special relationship with each of them
Ah, the mountainous microstate sandwiched between Austria and Switzerland, the principality on the Rhine, the constitutional monarchy with a sordid history of taxation scandals and a miniscule population of around 37,000 citizens. German-speaking Liechtenstein is Austria’s most erudite (with the highest PISA scores in Europe) albeit tiniest neighbor, and an irritatingly strong competitor in alpine sports. While not a member of the EU, it is part of the Schengen zone and the European Free Trade Association.
After the fall of the Empire in 1919, the Liechtenstein principality quickly set up an embassy in Vienna, which was promptly suspended by the new Austrian Republic, which wanted nothing to do with old imperial ties. So Switzerland assumed Liechtenstein’s diplomatic relations with Austria. It was finally reopened in 2000.
Liechtenstein makes headlines for strange reasons: In 2007, the official size of the country grew by about half a square kilometer due to more exact measurements. A few months later, a Swiss army troop got lost on a night exercise in the Alps and mistakenly marched onto Liechtensteiner territory. This was not the first time Switzerland had botched military maneuvers at Liechtenstein’s expense. In 1985 some Swiss missiles were misdirected during a storm, landing in the principality and costing millions of Swiss francs in damages.
Since Austria has enabled automatic information exchange, Liechtenstein’s rules on financial anonymity have made it one of the few remaining tax havens for investors. With a Liechtensteiner trust, the identity of the account holder can be withheld from authorities. Austrian depositors can also profit from better tax conditions especially in terms of succession planning and wealth protection. Now that’s a good neighbor!
Border with Austria: 34 km, bordering Vorarlberg
Population: 37,000 people
Size: 160 km2
Trade volume with Liechtenstein:
Imports from Liechtenstein: €269 million
Exports to Liechtenstein: €525 million
Balance: €256 million
On Liechtenstein’s national holiday all residents are invited to a party in the garden of Vaduz Castle.
Click here to read up on Austria’s next neighbor.