MONACO

NATURAL ENVIRONMENT: Monaco, small country in southwestern Europe. Monaco lies on the Mediterranean Sea at the foot of the Maritime Alps, forming an enclave in southeastern France. After Vatican City, Monaco is the smallest nation in the world, with a land area of just 1.95 sq km. Located just east of Nice on the French Riviera and near the border with Italy, Monaco is one of Europe’s most popular resort areas. Sheltered by the lower slopes of the rugged Alps, Monaco enjoys a Mediterranean climate, with hot, dry summers and mild winters. Tourism is an economic mainstay of Monaco, which is famed for its fine beaches and hotels, its casinos, and the annual Monaco Grand Prix automobile race. Tiny Monaco is highly urbanized, making it the most densely populated nation in the world. Villas, hotels, shops, and high-rise apartments climb up the rocky hills. To meet demands for more space, Monaco has created new land by dumping rock and earth along the shore. Monaco’s small harbor provides anchorage and docking facilities for cruise ships, luxury yachts, and smaller pleasure craft. Although independent, Monaco is closely associated with France in economic matters and foreign affairs. Princes of the Grimaldi family from Genoa have ruled Monaco for most of the last seven centuries. Today, Monaco remains a principality. Under a constitution adopted in 1962, the prince shares power with an elected legislature. In 1993 Monaco became a full member of the United Nations, and in 2004 it joined the Council of Europe.
ECONOMY: Monaco is a prosperous country. Living standards are among the highest in the world. Tourism and financial services drive the economy. Each year millions of visitors flock to its beaches, four casinos, performing arts venues, boating facilities, and other attractions. In 2002 Monaco doubled the capacity of its port by installing a massive new floating dock designed to accommodate huge cruise ships. Monaco’s strict banking secrecy laws and minimal rates of direct taxation have helped it build a profitable banking and finance sector. Citizens of Monaco pay no income tax. Low taxes have prompted many international corporations to establish offices in the principality. However, Monaco’s banking and tax policies have invited sharp criticism from the French government, which has accused the principality of allowing businesses and individuals to evade taxes and launder money in its banks and casinos. Until 1962, Monaco refused to impose any income taxes on residents or international corporations with headquarters in the country. Wealthy tax exiles from France, among other nations, took up residence in Monaco, knowing their money was safe. Monaco’s status as a tax haven provoked a crisis with France, leading to a compromise arrangement in which noncitizens would be required to pay French income-tax rates and taxes would be levied on corporations with substantial business dealings outside Monaco. Today, income taxes, in addition to sales taxes, have become an important source of government revenue. Monaco also generates revenue from state-controlled monopolies on the sale of tobacco and colorful postage stamps, which are popular among collectors. In an effort to further diversify its economy, Monaco has developed some light industries, mainly in Fontvieille. They include pharmaceuticals, perfumes and cosmetics, electronic equipment, paper and cards, clothing and textiles, and plastic goods. Monaco is in a customs union with France, an arrangement that governs the customs, postal services, telecommunications, and other economic activities. As in France, Monaco’s unit of currency is the euro, the monetary unit of the European Union, although Monaco is not itself an EU member. Monaco’s economy relies heavily on migrant labor, mainly from France and Italy. Monaco-Ville