Monaco outraged by French threat

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The Independent Online

Relations between France and Monaco, the tiny state on its southern coast, plunged to their lowest ebb in 38 years yesterday.

Relations between France and Monaco, the tiny state on its southern coast, plunged to their lowest ebb in 38 years yesterday.

The French government threatened to tear up all its political, economic and administrative agreements with the principality unless Monaco took steps to control the influx of "dirty" money from drug-trafficking and organised crime.

The threat, although based on international concerns about Monaco's involvement in money-laundering, creates a bizarre state of affairs. Monaco is largely administered by French officials, detached from French ministries.

At a press conference yesterday, the chief minister of Monaco, Patrick Leclercq, a career diplomat from the French foreign ministry, angrily rejected the allegations made earlier in a report from the French finance ministry.

The ministry said that the tiny state's legislation against money-laundering had "serious gaps" and that, in any case, there were "large discrepancies between (banking) law and reality" in Monaco. Efforts to investigate by French magistrates had been impeded by the Monaco authorities, it said.

The report went on to call for a "complete re-examination" of "economic, financial and judicial" arrangements between the two states. If an agreement could not be found, the French government would impose its own legislation, the finance ministry warned.

This amounted to a threat to scrap the arrangements negotiated in 1962 and 1963, after the French President, Charles de Gaulle, briefly closed the borders of the principality.

VAT in Monaco is collected by France. Under the arrangement Monaco is given up to £170m a year, which is more than half its budget.

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