Interview with Prince Hans-Adam II
A wise ruler and a good businessman
verlooking the town of Vaduz, the capital of Liechtenstein, an imposing 11th century castle is perched on top of an almost vertical cliff. From its windows, one can see people moving in the streets below. One can also see much of the small principality, the Rhine valley and the Swiss Alps beyond.
This is where the princely family of Liechtenstein has had its residence since 1938, and where the current ruler, Prince Hans-Adam II, lives with his family. The castle is his family’s property and is maintained with family funds.
In addition to being one of Europe’s last royals to have any real power, Hans-Adam is active in the family’s international business activities.
“I have to earn money in the morning so that I can afford to be head of state in the afternoon,” he told The Washington Times. In fact, he sees his family as offering a service to the people of Liechtenstein.
Although somewhat reluctant to discuss his family’s business affairs, which are themselves run out of several Liechtenstein foundations, the word about town in Vaduz is that his family holdings are in the range of $3.5 billion.
These include a US-based company producing hybrid rice grains and marketing the crops, called RiceTec, and one of the leading banks in Vaduz, LGT Bank in Liechtenstein. The family also owns one of Europe’s best art collections.
In a recent, wide-ranging interview in his castle, Prince Hans-Adam explained his vision for Liechtenstein, how it has become so successful, how it can develop further and why he wants the constitution to be modified.
Born in 1945 and tall by Liechtenstein standards, he spoke carefully, in excellent English, showing that he has thought deeply about issues affecting his country.
Highlights of his comments follow.
How has Liechtenstein become so successful?
One aspect is that the environment has become much more favorable for small countries in the center of Europe and, I would say, worldwide. The globalization of the world economy makes it possible for a small country to export to world markets.
Circumstances have made it easier for small states to succeed economically.
There is also a better acceptance of small countries on the political side, though international organizations like the United Nations, the Council of Europe and others. This was not always the case in the past.
These are the external factors which have generally improved the possibilities of small states to take part in, and take advantage of, the world economy and the possibility of worldwide cooperation.
You don’t need a network of very expensive embassies all over the world to be in contact with other countries. Those external factors have done a lot to improve the situation for a small country like Liechtenstein.
I have to earn money in the morning so that I can afford to be head of state in the afternoon.
On the other side of the coin, if you have opportunities you have to be able to take them up. I think we have succeeded quite well with that.
Here in Liechtenstein, quite early in the 19th century, we tried to improve the schooling of the people. My ancestors introduced systems for general schooling from the beginning of the 19th century, even though the education was not used so much in the beginning.
We were very early in this educational process for Europe, but we couldn’t really take advantage of it because we didn’t have the possibilities to build up industry here. There was a lot of emigration, but there was a tradition to have basic schooling: a good, broad, primary school system.
We were always very open as an economy. We had a treaty with the Austrian- Hungarian empire, in the middle of the 19th century. That was the beginning of our industrialization. It was possible to begin to build up industries because we had access to a very large market, one of the largest in Europe, just neighboring us.
After the collapse of the Austro-Hungarian Empire we had the possibility of access to the Swiss economy.
The policy was to encourage investors to come here, to have low taxation, and not too many government regulations. We had a very open economy, which has been a tradition here to a large extent. Location and an open economy helped quite a lot.
America saved us in World War II and in the Cold War. I have no illusions.
And then the stability of the government meant it was possible to follow policies over a longer period of time. Also to have support from the population for that. It was not a policy that was somehow detached from the people.
With the direct democracy we have here, we always get feedback to a certain degree. This was a tradition ingrained in the political culture rather early on.
These were important internal factors: stability, open economy and the need for hard work because you don’t have any natural resources.
Even now, poverty is not that far in the past, at the time of World War II. Up to the end of WWII we had people who had to emigrate.
There has also been the sense that we have to inter-connect worldwide. There was acceptance here in the population for Liechtenstein becoming a member of the United Nations, unlike Switzerland. It was accepted here that we would also become part of the European Economic Area.
This tradition helped us to draw in a large community more easily than Switzerland, even though we have been closely connected to Switzerland for the last 80 years.
What are the areas you would like to see developed in Liechtenstein?
We could still liberalize certain areas. Schooling is still run by the state here. We hardly have any private schools. I think we could improve the education if we introduce a kind of voucher system, which has been discussed in the US.
In certain areas, such as insurance, we still have an old, state system. There might be a better system than we have now, which is modeled on the Swiss system. We might be able to improve on the health insurance system as well.
I am glad that we are now liberalizing telecommunications, which we didn’t before because of our postal treaty with Switzerland. I have been in favor of liberalizing telecommunications for the last 25 years. Then it was too revolutionary and we would have had to cancel the treaty with Switzerland, but it would have been a good chance for a small country to take a lead. I think we missed that chance, unfortunately.
I was always in favor of liberalizing the banking system, which was closed until recently. Luckily this barrier came down too with the EEA. I see progress but there is still room for improvement.
Banking and industry are each strong. Are you concerned about less-developed sectors of the economy, like tourism?
A competitive advantage for a really strong tourism industry is really not there. One reason is that we have a very expensive labor force. I think we are the only country in the world that can employ Swiss guest workers! That gives you an idea of how expensive it is to hire people.
The other problem is that we don’t have enough land to build a few large hotels. These two factors limit us to day tourism. Tourism will always remain a small percentage of our total economy.
Are there areas that you have not mentioned that Liechtenstein can excel in?
We have some bids for telecom projects, and there is a good chance that this will take off. We have seen through the liberalization of our financial sector (which is more or less forced on us by our membership in the EEA), that the insurance sector is taking off. In banking there is also more potential for the future.
I also see potential for more development in industry. For example, we have not been active in anything to do with biotechnology or software. These could develop. Around the industries already here, others can grow.
You have been very keen to promote Liechtenstein as an independent country, by joining the UN, EEA, etc. What role would you like to see Liechtenstein play in the world?
We can bring to the world certain ideas and initiatives that are not dependent on size. We can concentrate on those areas where we can have a positive influence.
Personally, I have always been very interested in the question of self-determination. This will be a problem that will have to be solved down the road, one way or another.
Then there is the question of peacekeeping worldwide: how do you do that?
If Switzerland does join the European Union, I think we will stay outside.
As long as we have an open economy, low taxation and a good educational system we will not have to worry too much about the economy. Then we can concentrate on just a few things internationally: to have good relations in Europe, with the UN and other international organizations.
When you speak of self-determination, are you thinking of places like former Yugoslavia, Cyprus and other small countries struggling with this issue?
Yes. If you look at the development of the last few decades, we are seeing many large empires falling to pieces. But not only empires, such as colonial empires and the Soviet empire, but also smaller states, like Yugoslavia and Czechoslovakia. I think it is a process that is not going to stop.
Circumstances have made it easier for small states to succeed economically, and even militarily it is easier for them to win wars of independence.
We can bring to the world certain ideas and initiatives that are not dependent on size.
By moving towards globalization, the traditional nation-state will become much less relevant. This will lead to the need to restructure centralized nation- states, otherwise they will break apart. We have to find ways to handle this process peacefully.
I have always been interested in history. If you look at thousands of years of history, there are periods where large empires would prevail, and then times when small states would do well.
Since the Middle Ages we have been in a consolidation process that has produced large states or empires. After World War II we have seen a change in this trend. This will accelerate.
In the past we have handled changes with war: aggression when it went towards building up; civil wars when the trend was towards breaking up.
With the weapons of mass destruction that we have now, we can no longer afford to handle the transitions in traditional ways. We have to find new mechanisms. This is a little bit idealistic, but necessary.
So the best thing Liechtenstein can offer the world is a model of how to be asmall, peaceful state?
Liechtenstein is in a good position to do this because nobody suspects us of wanting to take over another nation or people, or [to harbor irredentist aspirations]. We can just try to develop ideas and proposals.
Is the UN the best vehicle to make an impact?
I think it is the best forum because it affects not only Europe, but the rest of the world. It is the club where everyone is a member (with the exception of Switzerland).
All kinds of ideas can be discussed, formally and informally.
On the European level, we have been very involved in discussions with the EU on the EEA. Once these are completed, however, we will be free to pursue more actively our ideas on the level of the Council of Europe.
Are you convinced that the outstanding issues with the EU can be solved?
There is one main issue: the free movement of workers. This has to be solved, but for the moment we don’t really see how it can be solved. That is a very hot issue here in Liechtenstein. It will take time, but it will be solved. The EU leadership appreciates our situation.
We also still have to build up the expertise in our administration. We have to do many things ourselves that up to now the Swiss have done for us. This absorbs a lot of energy for us. We have to keep up our legislation process to put all the EU laws that are relevant to us into Liechtenstein law. This is not yet over.
Regarding domestic politics, what changes would you like to see in the Liechtenstein constitution?
I would like the constitution to become more democratic, and for self determination. We have direct democracy in the constitution, and people can express their opinions through the parties and parliament, but I think it can be strengthened on the community level.
An important issue for me and the princely family has to do with the absolute veto power of the reigning prince. The veto power is not bad, and can be used to make the people rethink what they vote for.
It has only been used one time, by my father. He said the legislation was not good, and eventually the people agreed with him and supported a modified version.
I and my son (the heir) are convinced that in the constitution it should be very clear that the reigning prince cannot use the veto if the people of Liechtenstein want to abolish the monarchy. The princely family only wants to be here if the people want us.
We pay for the monarchy ourselves, so we say we will provide this service, but only if the majority of the people want it. It would be wrong for us to force it on the population if the majority wouldn’t like to have it.
In my proposal, removing the monarchy would have to come from the population directly (through a referendum). The government and parliament would then have to work out a new constitution.
The new, republican, constitution would have to be accepted by a popular vote. We don’t want abolition of the monarchy to create a vacuum, which could lead to a dictatorship and turmoil, as we have seen in other countries.
If the people don’t want the monarchy, they should know exactly what they will get in its stead. A handover should be handled in a reasonable, democratic way.
We have heard that you want to take the nomination of judges from the parliament, and have it approve your nominations rather than vice versa, as it is now. Is this important to you?
Yes. In Liechtenstein, judges have been proposed to the reigning prince by the parliament, who would then officially appoint them. The prince has an absolute veto in this, however.
The tradition has been that party politics has played a very big role in the nomination of judges. Up to now, the majority in the courts was determined by the majority in the parliament.
This has caused some problems and the courts have not been as respected by the population as they should be. This caused problems in the 80s.
My proposition is to take the nomination of judges out of party politics. The reigning prince, who does not belong to any party and does not vote, would nominate candidates, on advice, to the parliament.
To prevent the prince packing the courts with his own people, the parliament would have the power to reject his nominations.
If the two sides could not agree, the people would decide in an election among the candidates and the ruler would have to accept the decision of this vote and would have to appoint the judge.
The present monarchies in Europe have good survival prospects.
Was it your initiative to change the constitution?
Yes, this proposition came from my side after we had a not very good experience. It might have been good for the parties, but not for the courts and the country.
The country does seem to function extremely well under the present constitution. If you cannot agree on the changes, it would not be a disaster, would it?
The country does function very well now, but on the parliamentary level there is not much support for the status quo. When the constitution was discussed in parliament about two years ago only two members were in favor of keeping the status quo.
Generally, are you satisfied with the role of the royal family in the system?
Yes. I think it is fine as it is, basically. But I would like to have those changes. I think it would be a big improvement. I think we can get them through a popular vote, if necessary.
So there are mainly the two points: the veto and the nomination of judges?
There is another point that I thought we should also consider. That is the freedom of religion. In the constitution at present, the Catholic church is basically the state religion.
The Catholic Church is supported to a large extent by the state and the communities. Comparatively much more than any other religious groups.
This is a tradition because Liechtenstein was practically 100 percent Catholic. Now we have 40 percent foreigners, including many who are not Catholic. Some became Liechtenstein citizens, and some Liechtenstein citizens changed their religion, so it is not the dominant religion any more.
Therefore, I think we should make a change. It is a certain kind of violation of the freedom of religion if you force the citizen and tax payer to pay with his taxes for a church of which he is not a member, or which, for whatever reason, he cannot agree with. I have for a long time been in favor of a change, although it is not that popular.
This might be difficult to get accepted?
Yes. It is very forward-looking. I am very enthusiastic about the American model. I have spoken out in favor of it here, in front of the people of the church, and at the last opening of the parliament, where I suggested it was the best model currently available.
When you look at the United States, people are much more religious than here because they are not forced to pay taxes for the church, and the churches have to really look after their customers, or they won’t get paid.
They are basically like other service companies. They should be more customer-oriented. It is something that is needed here. The churches in Europe badly need this, otherwise all the people will leave the church.
This idea is not as popular as I would like. As a compromise I have made another proposition, that we follow the new Italian model, where tax payers can decide which church, Catholic or Protestant, other religion or state-run cultural projects their special taxes will support. That would be a good compromise.
You would prefer a truly secular state, without a state religion?
Yes. But I know this is considered an extreme position here, and they tell me that already we are getting Americanized by having a McDonald’s.
Do you have any particular interest in developing relations with America?
Personally I have economic ties to America; our family has a company there and I have many friends there. I visit at least twice a year. My son has just graduated from Harvard Business School (in June). He also loves it there.
I have always said that I have great respect for the United States. It is one of the most interesting models, with the oldest working constitution, at least for a large state.
It has proved to be a very good model. It has been able to integrate people of many different backgrounds. It has been a great economic success. Of course, there is room for improvement here and there.
America saved us in World War II and in the Cold War. I have no illusions. If America had not been here, we would have become part of the Soviet empire. So I am very grateful. We also have very good bilateral relations.
Will you keep diplomatic relations as they are (with only an ambassador at the UN)?
For the moment we are so absorbed by work in the parliament and the European question, but I think down the road we might seek to have a representative cover Washington as well as the UN. I would be very much in favor of it.
Yours is one of the royal families most involved in politics in Europe. What is your feeling about the role of royal families in the future?
It is very different from country to country. The Grand Duke of Luxembourg, for example, chairs government meetings. This is something we don’t do.
Overall, I think the present monarchies in Europe have good survival prospects, each one in its special role. Here we can also envisage different solutions. We could go back to how it was before WWII, when the reigning prince was resident outside of the country (in Vienna) and was little involved in government.
It is rather recent that the reigning prince has been so involved in government (since 1938, when my father took up residence here). I think the majority of people would want to have us here, however. It is a model that worked in the past, and could work again in the future. As long as the reigning prince is in Liechtenstein, his political influence will be very strong. Perhaps some people don’t want it to be so strong.
You are an active businessman. How important is that side of your life?
It takes at least 50 percent of my time. I always say that I have to earn money in the morning so that I can be head of state in the afternoon.
What is your personal interest in business?
I find it fascinating. Perhaps more fascinating than government because you can make decisions faster and can see the results much faster. It covers a wide geographic area and different technologies.
All our assets are in different Liechtenstein foundations, and I am in contact with all the boards and management of the foundations, on policy and major strategic issues. The reigning prince is the chairman of these foundations.
You have one of Europe’s finest art collections. Do you plan to build a museum to house it?
Yes, but it will take time. Already more than 20 years ago my father planned to build a museum together with the state and our capital Vaduz. There were two popular votes in favor of the proposal, one on the State level and the other on the community level. Unfortunately, party politics got hold of the project and it failed.
I want to wait now first until we have solved the constitutional questions, and then I want to propose a project with much less involvement of the State and the community.
This would bring more busloads of tourists.
It would certainly give an impetus to our tourist industry, but I think it will take ten years or more before we can realize this project.
What is your vision for Liechtenstein’s future?
I would be very happy if we can remain a small independent state here in central Europe, even if one day Switzerland joins the EU, which I think is very likely. That we can stay very much as we are today: integrated into the European economy but not a member of the EU.
We want to be integrated with Europe, but also worldwide. We also want to play an active role in areas where we can make a positive contribution. I hope we can build up the expertise in our administration so that we can play a more positive role worldwide.
We are too small of a world to just care for ourselves, even a small state like ours has to care for others. If we can reach that, I would be very happy.
If we can also maintain our economic growth and integrate the foreigners who are already here, give them citizenship. A small country like ours has to be open. We have benefited over the last 40 years tremendously by having foreigners coming here to live, in many different fields.
That is my vision for the future of this country.
