1. “Micro-states: Wealthy but vulnerable”
Dr Archie W. Simpson

2. Overview Definitions Numbers and European micro-states Characteristics
Vulnerabilities
Economic strategies
Offshore financial centres

3. Definitions
Sovereign state with a population of 1 million or less. “The concept of micro-state is applied to states that have one million inhabitants or less. This is the usual method for defining micro-states” (Anckar,2003, p.380). - Armstrong and Read (2000; 2002; 2003) - Plischke (1977) - Mohamed (2002)

4. Numbers
The UN has 192 member states, 43 are micro-states. Since 1989, the UN has admitted 33 new members including micro-states and Switzerland. The EU has 27 member states, 3 are micro-states. The UN lists 15 non-self governing territories including Falklands, Gibraltar, Guam, and Bermuda. Other small territories include Faroe Islands, Greenland, Isle of Man, Channel Islands, and Northern Cyprus.

5. European micro-states
Origins Population (est. July 2008) Andorra ,000 Cyprus ,604 Iceland ,367 Liechtenstein ,498 Luxembourg ,006 Malta ,532 Monaco ,796 Montenegro ,177 San Marino ,973 Vatican City
Sources: CIA; BBC

6. Characteristics Small territories thus fewer natural resources.
Small populations.
Little political power or influence globally.
Militarily weak.
Most have no armies whatsoever.
Many have anachronistic political institutions.
Most are former colonies except in Europe.
UN members.
Once decolonised, most states join UN.

7. Vulnerabilities Fewer natural resources due to less territory.
Smaller population means smaller domestic market and working population.
External factors have larger impact.
Highly open economy is more vulnerable to global economic trends.
Militarily weak.
Lack diplomatic means globally.
Rely on other states to represent them.
UN membership required to extend diplomatic capabilities.

8. Economic strategies Need to specialise economically in 1-2 sectors.
Maximise resources including human resources.
Tourism.
Currency issues.
Participation in currency of others
Need to have access to wider markets.
Diversify economy as much as possible.
Less financial regulations to attract investment.
Offshore financial centres.

9. Offshore financial centres
No agreed international definition but,
Provides financial services to non-residents
High level of secrecy in banking
Low tax levels
OECD
Financial Action Task Force (FATF)
Annual list of states not co-operating; Liechtenstein and Monaco usually listed.
Dispute between Germany and Liechtenstein

10. Indicators of wealth?
Various facts and figures Andorra: 10 million visitors each year buying many goods Cyprus: Has a GDP per capita higher than 24 other European states Iceland: IMF, CIA and World Bank list in top 10 GDP per capita Liechtenstein: Richest Royal Family in Europe, worth £5 billion Luxembourg: IMF lists as having highest GDP per capita in world Malta: Has a GDP per capita higher than 19 other European states Monaco: estimates GDP of $900m per year Montenegro: Plans to build marina at cost of €650 million San Marino: Listed as ‘above average’ compared to Italy Vatican City: Listed as 18th richest nation per capita in the world
Sources: IMF; CIA; World Bank; and others.

11. Conclusions
The study of micro-states is as valid as the study of any other kinds of states. Micro-states have a number of interesting features and economic strategies. But micro-states are weak in geo-political terms and have a range of inherent vulnerabilities.