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The Prince vs. the ‘Paupers’

Liechtenstein's billionaire royal family is threatening to literally abandon its tiny, wealthy principality over a referendum to curtail its power. Is this the coming of the Liechtenspring?

Martin Schalk/Getty Images
Martin Schalk/Getty Images
Martin Schalk/Getty Images

From a cliff-top fortress that looks more like Count Dracula's abode than Cinderella's fairy-tale castle, Prince Hans-Adam II von und zu Liechtenstein looks down on the capital of his micro-nation, content that he has the final say on its rule.

From a cliff-top fortress that looks more like Count Dracula’s abode than Cinderella’s fairy-tale castle, Prince Hans-Adam II von und zu Liechtenstein looks down on the capital of his micro-nation, content that he has the final say on its rule.

With a net worth estimated at $7 billion, the silver-haired monarch ranks among the world’s richest heads of state, and he owns one of the most important art collections in private hands. His conservative principality, nestled between Austria and Switzerland, has the planet’s second-highest GDP per capita, and it is an island of economic stability in troubled Europe. But discontented rumblings are afoot after Prince Hans-Adam’s heir, 44-year-old Prince Alois, threatened to veto the result of a referendum last fall aimed at overturning Liechtenstein’s ban on abortion.

Although Prince Hans-Adam supports a formal division of church and state, he and his family do not hide their Catholic devotion. Eighty percent of their principality’s population of 36,000 is also Catholic. A massive carving of Jesus on the cross looms over the fireplace in Prince Hans-Adam’s vaulted office, and when he showed me around the 130-room castle this past winter, we stopped in a chapel adorned with a Gothic altar where he and his offspring pray regularly.

But unlike in the United States, where the battle over abortion rights is part of a larger cultural war, the tempest in Liechtenstein is not primarily related to religious belief: Rather, it centers on the extraordinary degree of political power retained by a dynastic leader in the heart of 21st-century democratic Europe.

"Dominions … are either accustomed to live under a prince or to live in freedom," wrote Machiavelli. Liechtenstein is accustomed to having some of both, but Prince Hans-Adam clearly tipped the balance when he used a 2003 constitutional referendum approved by 64 percent of the electorate to increase his leverage over parliament and the courts, obtaining power to irreversibly veto any law, dissolve the legislature, and appoint judges. But since November’s unsuccessful bid to allow abortion — it failed in the wake of a princely threat to veto it if it gained voter approval — a new citizens’ initiative is pushing for limits on the royal veto prerogative.

Even so, neither power nor money fully satisfies Prince Hans-Adam, who talks in terms of generations rather than the short-term goals of most elected leaders. To ensure a smooth succession, in 2004 he appointed his son Prince Alois as his representative in running day-to-day government matters, but he remains head of state and still exerts considerable influence. Prince Hans-Adam, free from the daily rigors of governance, has recently sought international recognition by writing a book — called The State in the Third Millennium and published in 10 languages so far — presenting Liechtenstein’s odd constitutional monarchy as a model for other countries.

He also donated $12 million to Princeton University in 2000 to found the Liechtenstein Institute on Self-Determination, where he and his son serve as advisors. "Putting The ‘Prince’ Back In ‘Princeton,’" a student blog at the university commented in 2010 on the 10th anniversary of the institute, which organizes research on governance and sovereignty issues in places like Afghanistan and the former Soviet Union. So far, it has avoided dealing with Liechtenstein itself, perhaps because academic scrutiny in a freewheeling intellectual setting might prove awkward for the princely benefactor. "He takes a real interest but does not try to influence it," said Wolfgang Danspeckgruber, an Austrian who directs the institute.

In contrast to other European crowned heads (whom the prince derides in his book as unable to freely express themselves and "sitting in a cage that everybody can look into"), Liechtenstein’s royal family not only has real political might but also pays its own way. This boosts the popularity of a dynasty that owes much of its goodwill among the citizenry to Prince Hans-Adam’s late father, Prince Franz Josef II, who managed to keep Hitler at bay during World War II. "Long live the prince of the land, long live our fatherland," exult the national anthem’s lyrics, to the same tune as "God Save the Queen."

Unlike Britain’s royals, Liechtenstein’s dynasty does its utmost to stay out of the tabloid press and maintain a low-key lifestyle relative to its enormous wealth. Prince Hans-Adam joined other monarchs from around the world at a Windsor Castle lunch on May 18 celebrating Queen Elizabeth II’s Diamond Jubilee, but his family declined an invitation to attend last year’s wedding of Prince William and Catherine Middleton. "We must set our priorities," he told me in one of two meetings we held over the past few months, first in Vaduz, the capital, and then in New York. "And our priorities are, in contrast to other monarchies, not only responsibilities for the state but the responsibility of managing the family business, as the family has to pay for the costs of the monarchy and to a limited degree also for the costs of the state." To this end, the prince recently visited the United States to oversee the vast hybrid rice business he owns in Puerto Rico and Texas (Texmati rice is a princely product), one of several enterprises including the LGT bank, forestry, and vineyards that sustain his family’s fortune. It’s good to be the prince.

But now the 67-year-old sovereign is threatening to pack up and leave his prosperous nation, whose flourishing financial sector has made it a byword for money laundering and tax evasion, if voters approve a referendum scheduled to be held on July 1 aimed at limiting the princely veto. "We are prepared to serve as head of state and remain in Liechtenstein only under certain conditions," he told me in New York, invoking the collective royal pronoun as he spoke in a tony German. "One is the veto power, which has been used the last time by my father decades ago." His voice then rose, and he wagged a finger. If that veto power were curtailed, he warned, he and his family would bid "Auf Wiedersehen!" to the principality.

This all-or-nothing stance isn’t altogether new for Prince Hans-Adam. Facing criticism of his reign in the 1990s, the prince threatened to sell his castle to Bill Gates, even though Gates never indicated the slightest interest in buying it and it’s hard to imagine that the Microsoft founder would want the stone-faced aerie. All the same, Prince Hans-Adam still expects popular gratitude. "It’s clear that if it were not for the Liechtenstein family," he told me, "there would be no principality of Liechtenstein, and it would have disappeared from the map a long time ago. The people are well aware that we are the only country in the world that can afford to hire Swiss foreign workers."

Advocates of curtailing his veto power argue that Prince Hans-Adam claims undue credit for a postwar economic boom stemming from Liechtensteiners’ own hard work. "He’s arrogant and snotty to the people," said a former top judge, Herbert Wille, who won a 1999 judgment against the prince in the European Court of Human Rights for violating Wille’s freedom of speech after the monarch refused to reappoint him to the bench in response to Wille’s political critique. "He frightens people. That’s his style."

And when a local newspaper asked the prince a few months ago about the chances for the referendum, he replied in the manner of French King Louis XV’s "après moi le déluge" exhortation: "Unfortunately, in the 20th century there have been all too many examples in which monarchies were shunted aside by revolution and replaced by bloody dictatorships."

But the democratic initiative known as "Yes — Make Your Vote Count" insists its aim is not to topple the monarchy but simply to ensure that citizens have greater voice in their destiny. Spearheaded by a group of local activists who want to modernize their government and expand direct democracy, it gathered 1,732 signatures — 1,500 were required — over six weeks to qualify for a direct vote by the electorate to remove the prince’s power to veto the results of popular referenda. Even if this were to happen, it would still leave Prince Hans-Adam and his son with more power than most elected heads of state, including a separate right to veto laws passed by parliament and the ability to dissolve the legislature. In principle, he could even invoke the contested veto to kill the measure if it were to pass, but backers have expressed the hope that he would respect the will of the people for fear of provoking a far-reaching anti-monarchical backlash.

The prince, whose aristocratic roots stretch back nearly a millennium, describes himself as "a convinced democrat committed to a form of democracy that far exceeds what is normal today," even if it’s hardly the norm nowadays for monarchs to be more than symbolic leaders much less have anywhere close to his degree of power. But he sees no contradiction in tenaciously clinging to inherited dynastic privilege. Prince Alois, who attended the British Royal Military Academy Sandhurst, is only slightly more circumspect, warning parliament in March that the princely house would not serve as a "fig leaf" for policies it did not support and "would completely withdraw from political life in Liechtenstein" if it lost the "necessary political instruments."

Adherents of the prince in the tiny country, once part of the Holy Roman Empire and only actually inhabited by the Liechtenstein royal family since 1938 (they lived primarily in Austria and what is now the Czech Republic until the rise of Nazism) hail what’s called a "dualistic" political system, whereby policy is shaped jointly by the princely house and a 25-member parliament. A large portrait of Prince Hans-Adam hangs in the chamber as if to keep an eye on the proceedings. The legislators, who serve on a part-time basis, rose in the prince’s defense on May 23, voting 18 to 7 against the citizens’ initiative as part of the procedure to put the referendum on the veto power before the public. Although open threats of a royal veto are rare, David Beattie, a former British ambassador to Liechtenstein, notes that the prince and his son regularly meet behind closed doors with officials, so "it’s impossible to know how many times government policy may have been influenced by the possibility of a veto."

There are only two newspapers in the 60-square-mile principality, and neither reports critically on the princely family. But a newly published book in German revealed that a bank Prince Hans-Adam owns paid hush money to a former employee involved in several crimes, and the prince himself made judicial interventions on the man’s behalf in a failed attempt to thwart his release of data on secret account holders evading taxes in the United States, Germany, and elsewhere.

The book, The Data Thief: How Heinrich Kieber Triggered the Greatest Tax Scandal in History, written by Liechtenstein journalist Sigvard Wohlwend, who also serves as spokesman for the "Yes — Make Your Vote Count" initiative, recounts that the princely LGT bank paid over $500,000 to Kieber and that the prince intervened in closed court to obtain a favorable judgment for the former employee who still sold the names of account holders at a division of the LGT Group, blasting a hole in the country’s allure for those seeking financial secrecy. "I don’t know how high the sum was," the prince told me when I asked about it.

The transaction wasn’t illegal in Liechtenstein, but it put an uncomfortable spotlight on the royal family’s role in seeking to preserve a bank secrecy long condemned by the OECD. Kieber, a former data-entry worker at the bank, ended up testifying before a U.S. Senate hearing in 2008 on Liechtenstein’s offshore banking practices. Later that year, the scandal resulted in the principality agreeing to share information on banking clients with the U.S. Internal Revenue Service.

The prince, of course, would rather expound upon his own book than his country’s banking scandal. As we talked, he picked up my own copy, with a cover bearing his coat of arms, framed by a rippling ermine cloak and crown atop. He calls it "a cookbook of political recipes, gathered over centuries by my ancestors and over decades by myself." His dream is "the creation of numerous small principalities throughout the world, where people can live in happiness and freedom," and the book concludes with a sample constitution that — just like Liechtenstein’s — sets heads of state above the law, exempt from prosecution. Feel free to adapt as necessary.

But his threat to abandon his subjects has some of them fearing for their future, anxious that Liechtenstein would lose its chief distinguishing characteristic in an age of globalization. "Without the prince, we’re nothing," fretted parliamentary president Klaus Wanger during debate on the 2003 referendum. Now, that sentiment is being echoed again ahead of this weekend’s referendum. Across the tiny country, pro-monarchists wear gold pins in the shape of the crown and festoon their cars with bumper stickers bearing the slogan, "For God, Prince and Fatherland."

Dozens of the monarchy’s supporters, including some of the country’s top business leaders, have also been posting videos of themselves professing fealty on a website called "Prince and People: We are Liechtenstein." The testimonials, simply filmed, emphasize the monarchy’s role in promoting stability and prosperity. But they have a somewhat eerie quality in a modern-day democracy. "It has the characteristic of a totalitarian society," said former parliamentary president Peter Wolff. "There are certain people who promote this mood, so that supporting the initiative is seen as being anti-Liechtenstein and against the country."

But would the prince really leave town if the referendum passed on July 1? Prince Hans-Adam has spent about $120 million to restore his ancient family palace in Vienna as a private residence, with capacious underground storerooms for his art treasures and offices for his bank. And, in talking to me, he voiced surprisingly scant affection for his mountainous country and its sleepy capital, Vaduz. He went out of his way to point out that, of his four children, only his eldest son lives there and that all three of his own siblings also reside abroad. "It is just as attractive to live in Vienna as in Vaduz," he said. "I don’t have to live in Liechtenstein."

Wolff and other backers of the referendum are prepared to call his bluff, arguing that the prince would never abdicate because he’d lose the enormous tax exemptions enjoyed as head of state. For his part, Prince Hans-Adam expressed confidence that a majority will uphold his veto power. "The referendum will be rejected," he said, "because there is a certain mistrust of politicians not only in Liechtenstein."

With a majestic straightening of his pale blue shirt sleeve, Prince Hans-Adam drew a final distinction between himself and those politicians, adding, "I don’t need to run for reelection."

<p> Michael Z. Wise has covered Central Europe for Reuters and the Washington Post. </p>

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