Non-EU smallest states and territories

There are a total of 12, wholly or partly, self-governing countries or territories in Europe, but formally outside the European Union, with a land area each of below 15,000 square kms. Some are so small that they have open borders with adjacent states and also effectively use the same currency. A number of territories have been excluded because although they are semi-autonomous, they are linked directly to their parent EU state – such as the Azores, Canary islands, Ceuta and Madiera. We have also excluded here the Oblast of Kaliningrad – which is part of Russia, but is physically isolated and partly cut off by two Baltic states. Five territories that are outside the EU, but are semi-autonomous entities owned by the UK are Alderney, The Isle of Man, Guernsey, Gibraltar and Jersey. We have also excluded these from our list.

We have, however, included four territories that have a highly controversial status and are not recognised by the UN. However, they do have self-proclaimed governments and many of the genuine trappings of a nation state.

Country Summary

Andorra: A landlocked state high up in the Pyrenees mountains between France and Spain. It is alternatively ruled over by the French President and a Spanish Bishop. Its 467 sq km has a population of 77,000. It is principally a tourist centre, but with a well-developed financial sector. Curiously it has one of the most long-living populations in the world – largely thanks to a high quality health system.

Breakaway states: There are several breakaway states that are remnants of the Soviet era, or the unsettled political situation in the Caucasus. They are de facto independent entities – although not accepted as such by their originating, or many surrounding, states. These are Abkhazia (former Georgian state), Artsakh (formerly Azerbaijan) South Ossetia (Formerly Georgia) and Transnistria (Former Moldovan state).

They neither strictly lie in Europe or the middle East and are only recognised by each other. The exception is Transnistria that is recognised by Venezuela, Nicaragua and Nauru and is home to a division of the Russian Army). The total area of these states is not insignificant – being virtually the size of Belgium with a combined population of about one million.

Faroe Islands: A tiny group of islands covering 1399 sq kms and with a population of 50,000. This autonomous country lies within the Danish Kingdom, but is not part of the European Union and has its own independent constitution and parliament. The fact that there are no border checks with the European Union – despite the Faroes not being part of the Schengen free movement treaty – is because of a separate Nordic passport union.

Kosovo: This country of 10,908 sq Kms has a population of 1.9m. It was a product of the Balkan wars and was once an autonomous region of Serbia. Full independence from Serbia was not declared until 2008 and it today remains a disputed territory. However, its international recognition makes it less marginal than several disputed states on the eastern borders of Europe. The Brussels agreement of 19 April 2013 has yet to be implemented. This granted the Serb minority control of its own police force and appeals courts.

Liechtenstein: This remnant from the Swiss Confederation uses the Swiss currency and has strong links with adjacent Swiss Cantons. Its status as a financial centre has been reduced by OECD-led actions aimed at tax havens.

Monaco: Just 2 square kms in size this Principality is the home of several international organisations, a gambling centre through several casinos and provides a haven and playground for the very rich.

Montenegro: This country is highly mountainous, but has a coastline along the Adriatic Sea. It broke away from Serbia after a referendum in 2006 and its area is 13,812 square kms – with a population of 622,000. There is no national currency and it freely bases its economy on the euro. Montenegro is an EU candidate country and could become a member by 2026.

San Marino: This fairly wealthy state is surrounded by Italian territory – although it is not far from the Adriatic coast. It also enjoys the curious status of having more cars than people. It covers 61 square kms and has a population of 33,000. It is the smallest member of the Council of Europe and many of its laws as well as its national constitution date back to the sixteenth century.

Vatican City: The world’s smallest country, covering less than one square km. This city within the city of Rome has just 451 citizens. It was created to retain the political independence of the papal powers although, strictly speaking, it is subject to the sovereignty of the “holy see” – 1.2bn Catholic believers around the globe.

Greatest advantages: Physical scale and landlocked nature of all but one state makes them difficult to operate from as business centers. The non-recognized states have effective blockades preventing free trade.

Greatest disadvantages: Companies operating in these countries can have close relationships with officials and enjoy a considerable freedom to act, with the minimum of formalities. They are also free from many EU Directives and Regulations

Proportion of global land area: 0.1%
Proportion of global population: 0.1%
Annual rate of population increase: %
Life expectancy: Men 74.5 years Women 79.9 years (Monenegro)
Working population in the informal economy: 5-15%
GSI Modern slavery (Forced Labour) 0.2-0.3 %
Unemployment rate: 1% (Monaco) to 17.4% (Montenegro)
GDP/capita PPP (current) $17665 (Montenegro) to $61051 (San Marino)
Female labour participation rate: 67.7% (San Marino 47.6% (Montenegro)
Male labour participation rate: 66.1% (San Marino) 55.4% (Monenegro)

World Bank rating (doing business): 40/ 190 (Kosovo)
FedEE overall employment potential rating: 6/10
FedEE regulatory rating: 4/10

Minimum wage rates (selected states)
– Andorra: 1045.33 euros per month (1.1.2018)

– Montenegro: 288.05 per month (2014)
– Kosovo: 170 euros per month (2011)