Playboy monarchy feels financial chill as 700th birthday celebrations begin

He is half-American, entering middle-age and he has spent his entire life in the family business. With his receding hairline and gold-rimmed spectacles, he might be the chief executive of a small, Californian software company. He believes he has the answer to the corrosive short-termism of the politics of the late 20th century (or any other century). The answer is monarchy.

Hardly surprising. His family business is the longest, continuously installed monastic dynasty on the planet (admittedly ruling an area marginally larger than a golf course). Nor is it just a ceremonial monarchy, like the Windsors. It is one of the few monarchies with real power (admittedly, with a Prime Minister and police chief appointed by France).

His name is Albert Grimaldi. He is the 38-year-old camera-shy brother of Caroline and Stephanie, son of Prince Rainier of Monaco and of Alfred Hitchcock's favourite actress.

The Grimaldi family business - to which Albert is heir apparent - celebrates its 700th anniversary today. The celebrations in the principality will last all year but begin today with a Te Deum, the unveiling of a family statue and a multi-media extravaganza on the sea-front.

Far from being an anachronism, Prince Albert told Le Figaro that he believed absolute monarchies were uniquely placed to thrive in the modern world. Only they, he suggested, can conduct "authentic, long-term policies".

It is true that, during his 47 years on the throne, Albert's father, Prince Rainier, has cannily adjusted his tiny fiefdom to the demands of a post-war world dominated not by old money but by international business and entertainment. He fought General de Gaulle to a beneficial draw on Monaco's tax and business status in 1962. He oversaw huge, high-rise property development. He introduced new cultural and sporting activities.

Rainier inherited a play-ground and tax-haven for the rich and idle, and re-shaped it as a playground and tax-haven for the rich and energetic. Monaco no longer depends on casinos, yachting and tourism. It depends on off-shore banking and property speculation. Its most celebrated expatriate residents are no longer tax-avoiding, British and French aristocrats. They are tax-avoiding, media-attracting sports and movie stars and tax and media-avoiding businessmen (especially from Italy and the Middle East).

Most famously of all, Rainier personally led the way into the media-saturated late 20th century by marrying Grace Kelly, a movie princess, in 1956. Monaco may have thrived on the change but his own family, arguably, paid, and continues to pay, the price. After the death of Princess Grace in a car-crash in 1982, their daughters, Stephanie and Caroline, were swallowed up by the world of nouveau-riche, exhaustively paparazzi-chronicled hedonism. Caroline's second husband, Stefano Casiraghi, was killed in a speed-boat accident in 1990. Stephanie, after a brief career as a pop star, married the French play-boy, Daniel Ducruet, in 1992. She divorced last year following his brief liaison with a former Miss Nude Belgium.

The people of Monaco, unlike the people of Britain, have forgiven their royal family every discretion. There is no serious threat to the Grimaldis' continuing reign, despite the almost complete absence of democracy. Eighteen people are elected to a National Council but the Prince retains absolute power, advised by a four-person cabinet, headed by a senior French civil servant. There are few authentic Monegasquese in any case - 6,617 out of a population of 29,972, which contains 121 other disenfranchised nationalities.

Lately, however, there have been chillier winds blowing through the 4km by 1km paradise. Property prices have tumbled. The government, which runs most things, is now running something unheard of - a budget deficit. The state-controlled Society des Bains de Mers, operating the casinos, hotels and restaurants, is in the red for the third year running.

Some residents, especially the more commercially savvy types attracted by Rainier, are wondering aloud whether more should have been done to diversify from purely finance and property-based activities to newer industries such as information technology and telecommunications. There are even the first mutterings about the democratic unaccountability of the bureaucratic and royal elite.

Democratic rebellion is most unlikely. Few in Monaco are on their uppers. There are three times more members of the principality's state orchestra (90) than registered unemployed (30). But Prince Albert, for all his talk of royal long-term planning, will not receive an entirely problem and risk-free inheritance.

Which begs the two questions which have exercised residents of the principality for many years now. When if ever, will Albert marry? And when, if ever, will Prince Rainier give way for his serious-minded son?

In his interview with Figaro, Albert pointed out that abdication is not dreamed of in the Monegasque constitution. But he also drew attention to his own advancing years by announcing his forthcoming retirement from the national bobsleigh team.