Monaco, Menton and the micro-state gamble

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Micro states, like Monaco, depend for their existence on the acquiescence of their larger neighbours.

From the poolside, Menton, southern France.

1848 was Europe’s year of revolutions. Metternich was overthrown, Louis-Philippe abdicated and the Prussian order tottered. These events found a distant echo on the Mediterranean coast. Charles Trenca led the population of Menton in revolt against Prince Florestan, and the principality the Grimaldi family had ruled for 600 years was reduced to the rock of Monaco and a few acres of adjoining seashore. The independent state of Menton survived for 12 years before its 3,000 poor farmers and fishermen decided to become French, in a plebiscite that would not have won the approval of the international observers who monitor such votes today.

Those voters did not know what they were doing. In less than a decade, completion of the railway would transform the barren coastline into the Côte d’Azur, Europe’s most desirable tourist destination. The events of 1848 and 1860 mean that the line that leaves Monaco returns to France for a five-mile stretch through Menton before it enters Italy.

The Grimaldis were deprived of revenues by the loss of their agricultural hinterland. An ingenious promoter, François Blanc, came up with a scheme to restore their fortunes: to create a centre for gambling, outlawed in most of Europe. On the low hill opposite the palace on the rock, he built the casino of Monte Carlo. Trains brought in affluent punters to the Hotel de Paris, and the plan succeeded beyond its creators’ wildest expectations.

Blanc invented a strategy now employed by micro-states everywhere: to be an unregulated island in a sea of regulation. Gambling continues to be a fruitful application, but tax avoidance and banking secrecy are more important today. Imitators of Blanc made Liberia a shipping registry and Bermuda an insurance centre. The opportunity to collect tiny margins on huge volumes of business generates revenues which, for a micro-state, can be disproportionate to the economic value created. Non semino e non raccolgo e pur mangiar voglio: “I neither sow nor reap, but I intend to eat” is an old Monagesque saying – where Monaco led, Liechtenstein and the Cayman Islands have followed.

Monaco thrives. An authoritarian principality in which every shop displays a picture of Prince Albert and criticism is impossible, although French journals are full of gossip about the ruling family. A socialist economy in which business and government are inextricable, yet where many of the world’s most robust capitalists reside. A theme park whose public elevators are lined with marble. A country whose few natives are well provided for by the simple fact of being born Monagesque.

Could this have been Menton also, if its lemon and olive growers had not dissolved their short-lived government? The prosperity of micro-states depends on the tolerance of their neighbours. Monaco’s relationship with France has sometimes been tense. In October 1962, de Gaulle launched the “siege of Monaco”. French officials guarded the borders and rumours circulated that France might cut off power and water, or even send in troops. The blockade became ludicrous when the American quarantine of Cuba was announced a few days later. The Grimaldis gave little away in a new accord.

France could close Monaco down if it had a mind to do so. Yet there is little aggravation, and even some benefit, for big countries in tolerating micro-states. They offer a safety valve that mitigates some of the rigour of high taxation and excess of regulation.

This acquiescence depends on micro-states being very small. The land once occupied by the 3,000 citizens of independent Menton today holds 50,000 permanent residents – and many holidaymakers in August. If Menton were built as densely as Monaco it would be like Hong Kong, and neither France nor Europe could contemplate a parasitic enclave on this scale.

When the citizens of Menton quit Monaco in 1848, they opened up – though they did not know it – an era of prosperity for Menton. Still less did they know that they had opened up an even greater era of prosperity for Monaco.

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