Liechtenstein’s EEA Complacency – a wake-up call

On 1 May 2025, Liechtenstein celebrated 30 years of membership of the EEA. To mark this occasion, the Liechtenstein-Institut held a conference entitled ‘The Future of the EEA Internal Market in View of Current Geopolitical and Global Economic Challenges’. The following text was prepared for this event, which took place in Liechtenstein on 15 May 2025. The main argument is that the success of the EEA EFTA countries (Iceland, Liechtenstein and Norway) in participating in the EU’s internal market has led to complacency, with looming challenges being ignored. This view is also shared by colleagues such as Halvard H. Fredriksen, who are warning against ignoring these challenges. In this contribution, the specific challenges that Liechtenstein, the smallest EEA EFTA state, is facing will be outlined.

Author: Georges Baur, Head of Research Law, Liechtenstein Institute

Already a few years ago, Christian Frommelt criticised the rather passive, opportunistic – and, I would add, complacent – attitude of Liechtenstein politicians towards foreign policy and, hence, the EEA. Whenever it was time to celebrate the 5th, 10th, 15th, 20th and 25th anniversary of Liechtenstein’s EEA membership, people congratulated each other on the wise and forward-looking decisions taken in 1992 and 1995 after two referenda. Many conveniently swept under the carpet how strongly they had opposed Liechtenstein’s accession to the agreement, in particular because they feared that it would lead to the destruction of the financial sector.

Whatever the earlier battles, over time the country has not only learned to benefit economically from its participation in the EEA, but the population, according to surveys, also supports Liechtenstein’s membership by more than 70 per cent. Former Prime Minister Hans Brunhart, who signed the agreement on behalf of Liechtenstein, once said that this would not have been possible without a special agreement to restrict the freedom of establishment of persons. Subsequently, there were only few disputes. Many potentially difficult effects of EU policies or acts that had to be adopted could be mitigated either by obtaining an exemption or by switching horses, i.e. by participating in a solution that the Swiss had agreed with the EU. The best of all worlds: having your cake and eating it too. With whipped cream on top!

Technically strong, politically less so

Technically, the country’s administration has done a good job. The structure, with a central EEA coordination unit reporting directly to the Prime Minister and overseeing the EEA-related work of other ministries, has been set up intelligently and has proved to be very efficient. And Liechtenstein has earned the respect of its EEA partners. This has been noted repeatedly by the EU.

However, an analysis of Liechtenstein’s political behaviour with regard to EEA membership must be less favourable. In the usual political discourse, if EEA policy is mentioned at all, the substance does not go beyond mere soapbox speeches. This is not surprising in the case of the parliament, as its members – understandably – generally lack the detailed knowledge to engage in a discussion on the technical details of EEA legislation, let alone comment on related policy issues. In Liechtenstein, parliamentarians are not professional politicians, but ordinary citizens with occupations ranging from farmer to bank manager. Parliamentary work is not a full-time job, and Parliament is only in session for a few weeks a year.

Such a system therefore inevitably leads to a preponderance of the executive, as the government has all the tools and intelligence needed to formulate policy and propose legislation. While it clearly uses its strong position in domestic policy, it does not do so to the same extent in foreign policy. It is clear that countries with strong direct democratic powers, such as Liechtenstein or Switzerland, tend to focus less on foreign policy and more on domestic policy. This is, of course, more the concern of the Liechtenstein citizens who not only elect the parliament once per legislature, but also vote on specific policy issues in regular referenda. Nevertheless, no government can afford to ignore foreign policy altogether.

Foreign and European affairs of a very small country

Despite its small geographical size and tiny foreign ministry and diplomatic service, Liechtenstein plays a fairly active role internationally. This is particularly evident in the UN or the Council of Europe, where Liechtenstein is a very active member state. Let’s just mention Liechtenstein’s veto initiative (Resolution 76/262), which was largely adopted by the UN General Assembly. Passed amid criticism of UN Security Council inaction in response to the war in Ukraine, the veto initiative resolution aims to enhance the effectiveness, accountability, and transparency of the UN when it comes to matters of international peace and security.

In the context of European affairs, Liechtenstein’s active role is not as evident. Since its inception, the EEA Coordination Unit has been seen by the Ministry of Foreign Affairs as responsible for European affairs. As a result, integration related political issues have mostly been left to others. If not the Coordination Unit, then the Liechtenstein Mission in Brussels bore much of the burden of having to make sometimes quite far-reaching decisions on Liechtenstein’s European policy. Since European law largely dominates Liechtenstein law, and Liechtenstein policy is strongly influenced by decisions taken in Brussels, it is rather surprising how little relevance European policy has in Vaduz. There is virtually no high-level post for European policy in the Liechtenstein Government.

Moreover, one would think that regular cooperation with the other two EEA/EFTA states would be a matter of course. But no: not only is there no Liechtenstein diplomat accredited to either Oslo or Reykjavik, but there is generally little political interest in the policies of these important partner states beyond the EEA agenda. This would, however, be a prerequisite for Liechtenstein to be able to discuss EEA matters with its partners and to safeguard its interests.

Geopolitical challenges and their impact on the internal market

So far, Liechtenstein has been able to get away with it. Now, in the 30th year of Liechtenstein’s EEA membership, that may no longer be good enough. Times have changed in many respects. For those who still believe in the “end of history”, Russia’s full-scale invasion of Ukraine on 27 February 2022 should have awakened even the most ardent European dreamers. And the global situation has only worsened since then, at least from a European perspective.

It has to be said that Liechtenstein’s foreign policy reacted quickly. And in contrast to Switzerland, for example, it immediately supported and implemented EU sanctions against Russia. Support for Ukraine is strong and, given the size of the country, quite substantial.

At the global level, trade relations continue to be reshaped, with changing geopolitics being a key driver. The United States has continued to rebalance its trade away from China. European economies have moved away from trade with Russia and increased trade with other partners, particularly the United States. However, with Donald Trump’s ascension to the US presidency and his threats to impose tariffs, European countries suddenly find themselves trapped. For various reasons, China cannot simply replace the US as Europe’s main trading partner. For example, developing economies now account for the majority of China’s imports and exports, rather than advanced ones. European countries have lost their position as privileged trading partners.

But geopolitics has also brought changes at the European level, in terms of the single market. The emergence of geopolitics poses a threat to the single market. Today’s geopolitical situation underlines the importance of the physical completion of the internal market. It is also a prerequisite for a more competitive Europe. Boosting the EU’s competitiveness by deepening the internal market is also a priority of the EU’s economic security strategy. The tense geopolitical situation also requires additional reflection on risks to the EU’s critical infrastructure, control of investments, security of supply chains, etc. All this has been publicly announced and discussed, for example in the reports by Mr Letta and Mr Draghi. And the EU Commission has proposed new initiatives to strengthen economic security. The European Union’s understanding of the single market has evolved in the light of the current geopolitical context and recent crises. There is now a greater focus on ensuring Europe’s future competitiveness, economic security and resilience. The Internal Market is seen as a tool to achieve these new objectives, rather than an end in itself.

Many of these initiatives for new legislation also affect the EEA, as they aim to strengthen the EU’s internal market. The new focus of the EU therefore raises the question of how this new understanding may affect EEA cooperation.

The EFTA States decided in July 2023 to set up a “Task Force on acts with significant horizontal dimension” with the mandate to “assess the practical impact on the internal market and the EEA EFTA States’ participation in it of acts referred to as acts with significant horizontal dimension”. Its findings were published in summer 2024. The Task Force “encouraged the Standing Committee, the EEA EFTA States and the EFTA Secretariat to use their common resources in an efficient and strategic way in order to achieve working procedures that allow for a timely horizontal assessment of EU initiatives and their potential impact on the internal market and thus on EEA cooperation, including the possible consequences of not incorporating such initiatives”. However, the political background to this rather technical recommendation is, in short, that the EEA EFTA States will no longer be able to adhere to the traditional concept of “EEA relevance”, as EU initiatives will increasingly affect both EEA relevant and non-EEA relevant areas. Thus, to put it bluntly, the EEA EFTA States have the choice of either becoming more and more “EU minus states” or losing more and more access to the Internal Market as homogeneity fails.

In view of these rather drastic consequences, it is surprising that – at least in Liechtenstein – no open political discussion is taking place.

The danger of the disintegration of the EEA and its consequences for Liechtenstein

And there is more: The Icelandic government has announced that another referendum on EU membership will be held in 2027. At the moment, opinion polls show that the Icelandic people are rather in favour of such an accession. In Norway, there is no such movement yet, but recent opinion polls show a noticeable decrease in those who oppose accession. For the time being, however, both leaders of the major parties, Arbeiderpartiet and Høyre, have stated that there is no intention to apply for EU membership in Norway.

Even if these plans do not materialise as quickly as planned, or at all, they cannot be ignored. According to the old French saying “gouverner c’est prévoir” (Émile de Girardin), it is the government’s duty to plan for all eventualities, unless it concludes that such developments will have no consequences for the country. If it does not plan, it will be doomed, as the often ignored second part of the quote says: “Ne rien prévoir, ce n’est pas gouverner, c’est courir à sa perte.”

The Liechtenstein government will therefore have to plan for various eventualities. Should Iceland indeed decide to leave the EEA within a few years, will Liechtenstein and Norway still be able to maintain the institutional structure of the EEA, i.e. the EFTA Court and the Surveillance Authority? If Norway were to follow suit, perhaps at a later date, what options would Liechtenstein have? At present, there are only three: return under Switzerland’s ‘umbrella’, with Switzerland managing also Liechtenstein’s foreign (trade) relations with the EU, join Andorra and San Marino in their association agreement with the EU, or join the EU – maybe with some minor adaptations – altogether. While the first two options would be rather unsatisfactory in terms of safeguarding Liechtenstein’s current level of sovereignty, the third option has always – without any substantial discussion – been considered by most political leaders and the general public to be incompatible with the country’s size. This view could, however, be questioned. But to have any chance of being accepted in a referendum, this option would have to be not only explored but also explained. Changing public opinion is like changing the direction of an ocean liner: it takes time and is laborious.

Ultimately, if Liechtenstein is willing to act, it cannot simply plan and act alone. Recent developments suggest that the new government is already starting to do so. It will need the support of its EEA partners. This leads to another ceterum censeo: Liechtenstein should intensify its relations with its Nordic partners, particularly Norway, as it should have done long ago. Norway and Iceland are important partners because much of the legislation to be implemented in Liechtenstein depends on their approval within the EEA institutions. In this respect, Norway exerts more real influence over Liechtenstein’s legislation than Austria, for example. However, obstacles to the incorporation of EU legislation into the EEA may stem from Norwegian domestic politics. Such problems and their potential impact on EEA cooperation must be addressed early on. So why is there no diplomatic representation of Liechtenstein in Norway? Diplomatic contacts through delegations in Bern or Brussels are insufficient, as these channels only become relevant at a late stage. Furthermore, relations between Liechtenstein and Norway extend beyond purely EEA-related issues.

There is only one conclusion: Liechtenstein must get its EEA policy up to speed!

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How to cite

Baur, Georges (2025): Liechtenstein’s EEA Complacency – a wake-up call. Blog. EFTA-Studies.org.