The relationship between the European microstates and the European Union.

Europe is home to some of the smallest sovereign countries in the world, also known as microstates. Nestled between the borders of the European Union (EU), we find Andorra, Liechtenstein, Monaco, San Marino and the smallest country in the world: Vatican City. Together, the European microstates have less than 200,000 inhabitants. This makes them less than half the size of the smallest EU member state, Malta, which has 530,000 inhabitants. Despite this, the microstates have managed to maintain their independence even during times of turmoil and war the European continent has known, and each country has its own history and cultural traditions. A striking fact: despite the microstates having good relations with their neighbours, none of them are members of the EU. Why is that and what is the relationship between the microstates and the EU? 

Size matters if you want to belong to the EU

As mentioned earlier, Malta is now the smallest EU country. Still, even compared to the smallest microstate, Andorra, it is a giant when you consider that Andorra has a population of only 80,000. Because of their size and population, the microstates are too small to follow the full acquis communautaire. These are all EU treaties and laws, European declarations and resolutions and all international agreements concluded by the EU.

In addition, the EU is not currently set up to add such small member states. The EU operates on a proportionality principle which means that members are allocated a number of seats in the European Parliament based on their population. However, there is a caveat to this: the maximum number of seats is 96 and the minimum number is six. Currently, Malta, Cyprus and Luxembourg have six seats each. However, these countries are still a lot larger than the microstates. Therefore, if San Marino with 33,000 inhabitants, for example, wanted to join the EU, it would also have to get six seats with the current rules, but that does not seem particularly proportional. So if the microstates want to join the EU, the current system would have to be completely overhauled, and that is a bridge too far for many. 

The EU has relations with all microstates, but there is no official strategy covering microstates in general. Instead, major differences can be seen in the relations between the EU and individual microstates. Below is an overview showing the different microstates and how they all relate to the EU.

Andorra

The Principality of Andorra is located in the Pyrenees on the border between France and Spain. The country is known for its luxurious ski resorts. Its capital, Andorra la Vella, is one of the highest-located capitals in Europe. Andorra has around 80,000 inhabitants who mostly speak Catalan – Andorra’s official language. In 1991, Andorra became a member of the European Customs Union, which means no import duties are levied on products to and from the country. Interestingly, Andorra is not part of the Schengen zone. So if you want to travel to the country, via France or Spain since Andorra does not have an airport, you have to pass a (not so strict) border check. Andorrans have used the euro as their primary currency since 2002, but it was not until 2011 that Andorra’s government signed an agreement with the EU making the euro the microstate’s official currency. 

An often underexposed reason why intensified cooperation between Andorra and the EU will not become a reality any time soon is the extremely strict abortion laws in place in the microstate. Having an abortion is prohibited in all cases, including those involving rape, incest and severe foetal abnormalities. This is because of Andorra’s unique system of governance. Although there is a democratically elected government, there are also two princes who serve as heads of state. One of the princes is the French president and the other is the bishop of the Roman Catholic diocese of Urgell in Spain. The role of the princes is seen mainly as symbolic, but in practice, having a Roman Catholic leader means that undergoing abortions is forbidden. Women who do have abortions can end up in jail. Although the European Commission announced an association treaty with Andorra and San Marino in April this year that would give the countries greater access to the European market, it seems unlikely that the relationship between the EU and Andorra will extend to include non-economic aspects. 

Liechtenstein

Prosperous Liechtenstein lies between Switzerland and Austria. The principality, with its capital Vaduz, is the only European country that lies entirely in the Alps. Liechtenstein, with its nearly 40,000 inhabitants, is often seen as one of the most successful microstates, not only in Europe but in the world. A major reason for this is the country’s prosperity, which is partly because Liechtenstein is a huge tax haven and has the highest gross domestic product (GDP) per capita. Even more important to Liechtenstein’s success is how the principality has managed its relations with other countries and international organisations. Geopolitically, Liechtenstein’s small size and even smaller population make it, to put it mildly, insignificant. Therefore, it is heavily dependent on protection provided by international law, as the microstate cannot defend itself. The country has built a reputation within organisations such as the United Nations (UN) as a champion of following international regulations.

Liechtenstein also seems to have everything well regulated in Europe, so EU membership is actually not seen as necessary by the Liechtensteinians. It is the only microstate that is a member of the European Economic Area (EEA) which, besides most EU member states, also includes Norway and Iceland. Membership of the EEA allows free movement of goods and services between Liechtenstein and the EU. Interestingly, the same rule does not apply to persons. Although Liechtenstein nationals are free to live and work in EU countries, a quota applies the other way round and residents of EU countries cannot simply move to Liechtenstein; only around 100 residence permits are issued each year. The microstate has also been part of the Schengen zone since 2011 but does not use the euro as a means of payment. Instead, Liechtenstein has established a monetary union with Switzerland and thus uses the Swiss franc.

Monaco

This city-state located on the French Riviera is for many a symbol of luxury. Think of the famous Monte Carlo casino featured in the James Bond film GoldenEye and the Formula 1 race that takes place every year on Monegasque streets. Monaco’s 36,000 inhabitants are ruled by Prince Albert II through a constitutional monarchy. The principality has a special position when it comes to EU participation, as it follows many European rules. In addition, Monaco became a member of the eurozone in 2002. For decades, Monaco has maintained close ties with France. This relationship has made the city-state a de facto part of the Schengen zone, as there is an open border with France. In addition, the relationship has also ensured that Monaco is a member of the Customs Union and the VAT area, applying EU standardised VAT rules. Monaco’s relationship with the EU is thus the result of Monegasque ties with its only neighbour.

Although Monaco complies with many European laws, the city-state has retained its sovereignty in several areas. The financial sector stands out most here: Monaco residents do not have to pay taxes on their income, making it a very attractive residence for wealthy individuals, including several Formula 1 drivers such as Max Verstappen. While this is attractive to Monegasques, it has also ended negotiations on a trade agreement between the EU and Monaco. This was prompted by concerns from European financial bodies about the possibility that Monaco could serve as a way to channel illicit financial flows into the EU. These fears were confirmed by the Financial Action Task Force, which found that the Monaco government is not doing enough to combat it. As a result, Monaco has been placed on an international ‘grey list’ of countries that are not doing enough to combat money laundering and terrorist financing.

San Marino

San Marino is one of the two microstates located in Italy. The country’s capital, located on Monte Titano, is, quite originally, also called San Marino. With its 33,600 inhabitants, the country is small, but for fans of the Song Contest, it will sound familiar. Indeed, San Marino is the only microstate to compete in the annual song contest, even though San Marinese contestants are often not from San Marino at all (does anyone remember Flo Rida in 2021?). Besides being the only Song Contest participant, San Marino is also the only microstate that is a republic. In fact, San Marino is the world’s smallest and also oldest surviving republic, founded in the year 301. The republic also has a special system of governance: there are two Captain Regents from different parties who are elected every six months. Sounds peculiar, but it seems to work. In fact, this system has been used since 1243.

Then to the relationship between the EU and San Marino. Officially, the country is not part of the Schengen zone, but because Italy encloses it, San Marino is actually a de facto member and San Marians enjoy the same benefits as Italians, although you may encounter some border controls. Although the microstate is not part of the eurozone, an agreement with the Council of the European Union allows it to use the euro as its currency. In 2013, the San Marinese government organised a referendum on applying for EU membership. A small majority voted in favour of membership, but the low turnout invalidated the result. The referendum incidentally was not called because EU membership was on offer, but because citizens had collected enough signatures to force a vote. So the question of whether San Marino will ever join the EU remains unanswered for now.

Vatican City

Now all that remains is the smallest country in the world with a population of just 825 people: Vatican City. The mini-state is the spiritual and administrative centre of the Roman Catholic Church and houses the Pope’s residence, the Vatican Palace. Vatican City is completely enclosed by Rome, so during your city break to the Italian capital, a visit to Vatican tourist attractions such as St Peter’s Basilica and the Sistine Chapel is well worthwhile. Vatican City as we know it today was created in 1929 by the Lateran Treaty, which was signed under pressure from Benito Mussolini who wanted to cultivate sympathy among the Catholic population. Vatican City is the only European microstate that is not a member of the UN, although it does have an observer seat.

Like San Marino, Vatican City is more or less part of the Schengen zone due to its location in the middle of Italy. A monetary agreement with the EU allows the country to use the euro as a means of payment, even though it is not part of the Eurozone. In return, Vatican City must comply with European regulations on combating money laundering and terrorist financing. While in the case of the other microstates, it is still somewhat conceivable that they will one day join the EU, that is not the case with the Vatican City State. A requirement for EU membership is a functioning democracy. Vatican City, however, is a theocracy, an authoritarian system led by the pope. In addition, its unique political and economic system makes it impossible to ever meet the Copenhagen criteria that determine whether a country can join the EU.

Special relations, but not membership

So, now you know a little more about the microstates you can find scattered across the European continent. Despite their small size, the mini-states have managed to retain their own identity and sovereignty, both in times of turmoil and in times of far-reaching integration. While there are differences in relations between microstates and the EU, a key commonality is that they all have a special place within the EU. The microstates are not full members of the EU, but through agreements and treaties, they can enjoy many of the benefits that come with the EU, which is quite nice when you are so small.

Sabine Herder has a master’s degree in Crisis and Security Management from Leiden University and is now doing a master’s degree in European Policy at the University of Amsterdam. Before this, she did a bachelor’s degree in Liberal Arts and Sciences with a major in International Relations.

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