ANGRY MONACO THREATENS TO BREAK AWAY FROM FRENCH CONTROL

The mouse roared last week when tiny Monaco threatened to throw off French
tutelage and "endow the principality with full sovereignty".

Prince Rainier III, who began his reign in 1949, ruled out war with France
to enforce his unilateral declaration of independence, but said he was
determined to seek total freedom from French control in retaliation for
accusations that Monaco was a paradise for drug dealers and tax evaders.

The Mediterranean principality, which covers about 2.5 square kilo metres,
is linked to France by "friendly protectorate" treaties. Fiscal, political
and judicial liberties were dramatically reduced in 1963.

Prince Rainier's power is kept in check by an executive headed by the
French ambassador, while French appointees hold key roles in the judicial
and economic systems.

The prince's sudden emergence into international politics at the age of 77
amounted to a showdown between the French Socialist government and one of
the world's most powerful financial networks. More than three-quarters of
the population are super-rich foreigners, who enjoy generous tax breaks
and Riviera sunshine.

Last month, after a parliamentary investigation into allegedly fraudulent
activities, France told Monaco to introduce reforms, which posed a
particular threat to the 12,000 French tax refugees in the principality and
to hundreds of businesses using Monaco to flout French tax laws. Among the
demands was the call for the imposition of a super-tax on personal fortunes
and company profits.

French officials demanded an explanation for the prince's reaction, which
amounted to a categorical refusal to buckle under. "I'm not going to
declare war on France, but Paris must respect us, something they haven't
been doing for months," he said in press interviews. "The accusations made
against us are completely false. The way the French government used the
media to make its charges public, and the tone and form they were given,
show a deliberate determination to blacken the principality's image."

The prince said diplomatic action would be taken to "dust off" old treaties
so that he could "give back Monaco to the Monegasques". He added: "The
treaties between the wars were drawn up when France feared that Monaco
would become a German-influenced base. There is no reason today why Paris
should intervene massively in our domestic affairs. Paris is the only
capital to accuse us of money-laundering. We're fed up being treated as
drug dealers."

Prince Rainier took Monaco insiders by surprise with his outburst. Since
1963 he has made no attempt to defy France, preferring instead to
concentrate on economic development by attracting investment.