A merger of the domain of Schellenberg and the county of Vaduz in 1712 by the powerful Liechtenstein family created the country. A principality under the Holy Roman Empire from the period 1719 to 1806, Liechtenstein finally achieved its full sovereign independence in 1866. A modern constitution was drawn up back in 1921, but even today the prince retains the power to dissolve parliament and must approve every act before it becomes law. Prince Franz Josef II was the first ruler to live in the castle above the capital city of Vaduz. He died in 1989 and was succeeded by his son, Prince Hans-Adam II.
Liechtenstein has no military service and its minuscule army (80 men!) was disbanded in 1868. It is best known for wine production, postage stamps, dentures (an important export) and its status as a tax haven. In 2000, Liechtenstein’s financial and political institutions were rocked by allegations that money laundering was rife in the country. In response to international outrage, banks agreed to stop allowing customers to bank money anonymously. However, it remains under pressure to introduce more reforms.
In 2003 Hans-Adam demanded sweeping powers to dismiss the elected government, appoint judges and reject proposed laws. Opponents warned of dictatorship, but the prince threatened to stomp off back to Austria if he did not get his way, and the population – possibly worried what an empty Schloss Vaduz would do to tourism – backed him in a referendum. The following year Hans-Adam handed the day-to-day running of the country to his son Alois, although he remains head of state.