(mŏn'əkō, mōnä'kō, Fr. mônäkō'), officially Principality of Monaco, independent principality (2005 est. pop. 32,400), c.370 acres (150 hectares), on the Mediterranean Sea, an enclave within Alpes-Maritimes dept., SE France, near the Italian border. It consists of four adjoining quarters—La Condamine, the business district; Monte Carlo, the site of the famous casino; Monaco-Ville, the capital, atop a rocky promontory; and Fontvieille, an area of light industry built largely on reclaimed land.
Monaco's beautiful location, natural harbor, exceptionally mild climate, and gambling tables in Monte Carlo make it one of the best-known resorts of the Riviera. Almost half of the mainly Roman Catholic population are French, while about 16% are citizens of Monaco and an equal number are Italian. French is the official language, but English, Italian, and Monegasque (a Romance dialect similar to Provençal) are also widely spoken.
The casino contains a theater, which houses the Monte Carlo Opera. Monaco has a 16th-century palace, a 19th-century cathedral in the Byzantine style, and a noted oceanographic museum, founded in 1910 by Prince Albert I. Auto racing is popular, and Monaco is home to both the Monte Carlo Rally and the Monaco Grand Prix. The Monte Carlo Open is a major professional tennis tournament.
Monaco has a customs union with France, and its currency is interchangeable with the French. Excise, stamp, transfer, and estate taxes are an important source of state revenue. Contrary to popular belief, the gambling casino (which is managed as a concession by a private corporation) accounts for only a small portion of government revenue, although it contributes greatly to the economy by attracting tourists. In addition to tourism and the foreign businesses attracted to Monaco by low corporate taxes, shipping and the manufacture of perfumes, pharmaceuticals, processed food, and precision instruments are also important.
Monaco is governed under the constitution of 1962. The heredity monarch is the head of state. The minister of state, selected by the monarch from three candidates nominated by France, is the head of goverment. The unicameral legislature is the National Council, which is elected by universal suffrage every five years. The monarch may initiate legislation, but all laws must be approved by the National Council.
By a treaty of 1918, the succession to the throne must be approved by the French government. A law had long stipulated that should the throne become vacant for any reason, including the death of a Grimaldi ruler without a direct blood heir, Monaco would become an autonomous state under French protection. In 2002 the constitution was amended so that any sibling of a ruler who died without issue could inherit the throne.
Probably settled by Phoenicians in ancient times, Monaco was annexed by Marseilles and Christianized in the 1st cent. A.D. In the 7th cent. it was part of the kingdom of the Lombards, and in the 8th cent. of the kingdom of Arles. It was under Muslim domination (8th cent.) after the Saracens invaded France.
Monaco was ruled by the Genovese Grimaldi family from the 13th cent. In 1731 the male line died out, but the French Goyon-Matignon family, which succeeded by marriage, assumed the name Grimaldi. Monaco was under Spanish protection from 1542 to 1641, under French protection from 1641 to 1793, annexed to France in 1793, and under Sardinian protection from 1815 to 1861. The districts of Menton and Roquebrune (long part of Monaco) were incorporated (1848) into Sardinia, which in turn ceded them to France in 1860.
Monaco again came under French protection in 1861. In the late 1800s income from gambling by very wealthy visitors became Monaco's primary source of revenue. Until 1911, when the first constitution was promulgated, the prince was an absolute ruler. Rainier III, succeeded his grandfather, Louis II, as ruler of Monaco in 1949. In 1956, Rainier married Grace Kelly (1929–82), an American motion-picture actress, and a male heir, Albert, was born in 1958. Rainier worked to diversify Monaco's economy and make Monaco attractive to middle-class tourists.
In 1962 serious economic disagreements arose between France and Monaco, and new fiscal agreements (1963) severely curtailed the right of French citizens to use Monaco as a tax haven. The Monaco government also came into conflict with Aristotle Onassis, who owned majority interests in most businesses there; Monaco purchased his interests in 1967. Relations with France again became acrimonious in 2000 when Monaco was accused of being a center for money-laundering and France threatened to force the principality to tighten the regulation of its banks. Rainier died in 2005 and was succeeded as ruler by his son, Albert II.
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