Since the 12th century, the city-state of Monaco, perched on the Mediterranean and bordering France’s southernmost shores, has gone through some very turbulent times.

But it has survived them all through sheer determination and the political foresight of its leaders throughout the centuries.

Ruled by the House of Grimaldi since 1297, the city-state’s sovereignty was declared in 1861 after centuries of being passed between Genoa, France and Sardinia.

Today, even though it is the second-smallest country by area in the world; only Vatican City is smaller, Monaco has attained a position of high standing within Europe and the world at large.

The number of residents the country can support is limited; Monaco is home to just over 38,000 inhabitants among which 8,300 Monegasques and including residents from 12 nationalities.

While Monaco’s size tightens the population, its economic strength adds additional incentives for residents.

Interestingly much of the working class in Monaco does not actually live there.

Daily, more than 30,000 French and 5,800 Italian nationals travel to Monaco to work.

This lends to the enormity of the private sector industries, which account for 86 percent of the labour force in Monaco.

Other than tourism, for which it is world famous, Monaco has developed into a destination for research centers, and 22 percent of the labour force works in scientific and technical activities, including administration and support services.

It also possesses competitive advantages in engaging in economic policy aimed at developing core competencies and nurturing economic diversity.

Its exemption of income tax has led to many celebrities setting up home there and over the years, it has created some unique and innovative business models that have allowed Monaco to develop as one of the wealthiest states in the world.

Small is beautiful…but not too small

On first examination, Europe’s microstates seem irrelevant, mere historical oddities that somehow managed to survive despite being surrounded by larger powers.

They are, however, some of the wealthiest places on Earth and play an important role as service economies.

European microstates are notable because they offer lessons on how to build a foreign policy on the principle of survival, the most basic need of any sovereign state.

Monaco is a microstate, which can be seen as one of the survivors from Europe’s consolidation into nation-states over the centuries. Europe features other such states, such as Andorra and San Marino.

These microstates have survived for so long and have probably succeeded by leveraging their greatest asset — their sovereignty.

But it seems that it is precisely for reasons to do with its size and degree of sovereignty that the future integration of Monaco as a full member into the European Union is unlikely.

Today, the generally accepted definition of a microstate is an internationally recognized sovereign state that has been able to unilaterally depute certain attributes of sovereignty to larger powers in exchange for benign protection of its political and economic viability against their geographic or demographic constraints.

Monaco is small in geographical and population terms, but unlike the constitutional monarchies within the EU, the Sovereign , arduous Prince of Monaco wields considerable executive powers and is not merely a figurehead.

In November 2013, the EU Commission published a report which concluded that “the participation of the small-sized countries in the European Economic Area (EAA) is not judged to be a viable option at present due to political and institutional reasons”, but that Association Agreements were a more feasible mechanism to integrate the microstates into the internal market, preferably via a single multilateral agreement with all the three states of Monaco, Andorra and San Marino.

Taking into account the size and the very limited natural resources of the country, the Princes of Monaco have always succeeded in negotiating protection and cooperation agreements with their large neighbours. And it is in this manner that for over 150 years, large sectors of the country’s economic and social activities are regulated through bilateral agreements and conventions with France. 

Today, with France having chosen to share and even transfer a number of its powers to the EU, its capacity to enter into contracts is more limited in certain economic fields and international commerce, for example.

Furthermore, through these bilateral conventions with France, the country has been, in a way, directly involved in the construction of Europe: European products and services are freely commercialized in Monaco. However, companies established in Monaco can face difficulties in exporting to EU member states.

It is therefore only natural that both de facto and de jure reciprocity be guaranteed.

And this is the reason why Monaco accepted the EU’s proposition to begin negotiations in view of reaching an Association Agreement.

The signature of an Association Agreement would also provide the benefit of a lasting legal and political framework for relations between Monaco, the EU, and EU member states. Among other things, it would set out the procedures for resolving any difficulties that might be caused by its implementation, by introducing a mechanism for settling disputes.

In addition to expanding economic prospects, the fact of establishing a partnership with the EU opens up the possibility of developing cooperation in areas of shared interest and participating in some of the EU’s horizontal policies on such issues as research, the environment and education (ERASMUS).

The first round of negotiations took place in Brussels in May 2015 and the talks are being held at a rate of one three-day session every seven weeks.

The majority of the sessions are held on a quadripartite basis, with the participation of the EU plus Monaco, Andorra and San Marino, and to a lesser extent on a bilateral basis with the EU and Monaco.

Although it may be difficult to arrive at a precise estimate of the duration of the negotiations, which will depend on the priorities given to the Agreement by the parties as well as the difficulties encountered along the way, it is hoped that an agreement can be reached sometime in 2020.

Long, arduous but steadfast negotiations

Monaco has always been at the core of European history and has deep, long-standing political, economic, social and cultural relations with the Member States in their immediate proximity and with the EU at large.

Also, the EU’s partnership with this country is founded on a common set of political and cultural values.

In fact, given its customs union with France, the Principality has been part of the Community customs territory as far back as 1968.

The Monegasque state also established a permanent relationship with the EU when it accredited an ambassador to Brussels in 1999.

The Principality of Monaco has been officially engaged in negotiations with the European Union, aimed at reaching a balanced agreement, which will allow Monaco to participate as fully as possible in the EU’s internal market, while ensuring respect for the Principality’s vital interests, taking into account its unique geographical, demographic and economic features.

The launch of these negotiations was the outcome of a dialogue with Monaco, Andorra, and San Marino begun by the European Commission in 2010, acting on the basis that “the Union will take into account the particular situation of small-sized countries which maintain specific relations of proximity with it”.

In December 2010, the Council of the European Union requested an assessment of the EU’s relations with European countries of small territorial dimension – Principality of Andorra, the Principality of Monaco and the Republic of San Marino – noting that “their current relations with the EU are extended but fragmented“. 

Following the adoption of a report produced by the Hungarian Presidency, in June 2011 the Council invited the European External Action Service (EEAS) and the Commission to continue their analyses and reflections on the future development of EU relations with the three countries.

In November 2012, the Commission published a communication in which it presented the “relations of the EU with the Principality of Andorra, the Principality of Monaco and the Republic of San Marino” and explored “options for closer integration with the EU”. 

The communication looked at five options: the status quo, a sectoral approach, a framework association agreement, participation in the European Economic Area, and membership of the EU.

It was accompanied by a working paper on the obstacles the three countries face in terms of access to the EU’s internal market and cooperation in other areas.

It was on the basis of this report that the Commission and the Council retained two options: participation in the European Economic Area and the negotiation of one or more framework association agreements.

In November 2013, the Commission adopted a report in which it concluded that negotiation of one or more association agreements was the more viable of the two options.

It also set out the key principles which should underpin the negotiations: respect for shared values, the need to ensure the homogeneity and good functioning of the internal market, and consideration for the specificities of countries of small territorial dimension.

In December 2013, on the basis of this report, the Council invited the Commission and the High Representative to submit, by the end of April 2014, a recommendation on opening negotiations with the three countries with a view to concluding one or more association agreements.

The Council notably reaffirmed that a “closer association of Andorra, Monaco and San Marino with the EU is also in the interest of the EU. It should contribute to addressing gaps and overcoming inconsistencies in relations, which are currently fragmented and diverge from one country to the other.

Furthermore, enhanced participation of the three countries in the internal market could have a positive, though limited economic impact on the EU, in particular with regard to employment in the neighboring regions and cross-border economic activity”.

Yet more challenges ahead

Monaco, along with the other microstates in Europe have showed a remarkable ability to survive.

For centuries, a combination of political skill, adaptability and sometimes outright luck have allowed them to survive Europe’s endless political vicissitudes.

In the future, however, these microstates will face new challenges.

As for Monaco, the Government is aware of the complexity of the images associated with the country. Consequently, a thorough examination of its image has been a strategic task, as it would be for any State striving for increased modernization and adaptability.

Studies show that Monaco’s image is largely a very positive one in the public’s view. However, the robustness of its institutions, the quality of life, the country’s geographical location, the strength of its economic and social models or the hosting of famous international events often obscure, in the mind of some audiences, the origins of the deep-seated wealth of the country.

Along with Monaco’s relentless efforts to further increase the convergence of its legislation with EU internal market acquis and strengthen its administrative capacity in view of facilitating the implementation of further relevant EU acquis, the Government has embarked on focused communication campaigns to increase Monaco’s attractiveness for a target population and, more generally, international public opinion.

A campaign entitled “Monaco – A special role in the world” was the result of an initiative by H.S.H Prince Albert II. It has been widely disseminated and has won several awards.

The Sovereign Prince’s interventions and exemplary positions have also largely contributed to transforming Monaco into an internationally recognized advocate for the protection of the seas, the development of eco-responsible initiatives and climate change issues.

A concrete example is Monaco’s offshore extension. This is ecological engineering at the core of project design.

The creation of this 6-hectare offshore space between two reserves that are marine protected areas (the underwater reserve of Larvotto and the Spélugues coral reef), illustrates the particular care given to respecting the site’s biodiversity and attention paid to impacts arising from the worksite.

With available land at a premium, this project will extend Monegasque territory, in the Larvotto district, as has been done many times since the first land reclamation in 1872.  Since then the Principality has increased its surface area by 25%, today occupying 2.1km².

With more dramatic plans being submitted daily, the Principality has its hands full to control the already burgeoning area while retaining its historic and cultured past.

The Principality of Monaco

The Principality of Monaco is an independent and sovereign state under international law. Its government structure is a hereditary constitutional monarchy, governed by the Constitution established on December 17, 1962. The Principality of Monaco is a city-state.

The executive power rests under the high authority of His Serene Highness Prince Albert II, Sovereign Prince of Monaco. The Prince also grants amnesty and Monegasque citizenship, and bestows orders, titles, and other ranks of distinction.

The Government is composed of a Minister of State who represents the Prince. He or she is the leading authority after the Prince, as well as President of the Government Council. The Minister of State is in charge of the administrative duties concerning the country and the State executive services. He is advised by five Government Councilor-Ministers who are each administrative heads of various Ministries (Départements): Interior; Finance and Economy; Health and Social Affairs;
Public Works, Environment & Urban Development; and Foreign Affairs & Int’l Cooperation. The Minister and the Government Councilors are directly accountable to the Prince for the administration of the Principality. Government Councilors hold the rank of Ministers.

The Sovereign Prince is advised by two committees, the Crown Council and the State Council. The Prince consults with the Crown Council on specific matters as is outlined in the Constitution, such as the signing and ratifying of treaties, dissolving the National Council, and the granting of amnesty and Monegasque citizenship. The State Council is responsible for advising the Prince on matters of law and order, and may be consulted on other matters.

The legislative power is exercised by both the Prince and the National Council. The Prince initiates laws, which are then voted upon by the National Council.

The judicial powers are exercised by the courts and tribunal in the name of the Prince, independent of the government. The separation between the administrative, the legislative and the judiciary branches is assured. The judicial system adheres to the principles of fairness and impartiality. These principles are ensured through the creation of various tribunals, permanent Magistrates, separate systems in the charging and sentencing of crimes, double jurisdiction degree, and the possibility of recourse through the court of appeals.

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