As a constitutional monarchy ruled by the Grimaldi dynasty, Monaco is a country in its own right and independent from France, although both countries have a special relationship.
A July 1918 treaty, incorporated into the Treaty of Versailles, provides for limited French protection over the Principality of Monaco, establishing a policy alignment with French political, military, and economic interests, while maintaining independent sovereignty. A new treaty between the countries in 2002 clarified that in the absence of Grimaldi heirs to carry on the dynasty, Monaco would remain an independent nation, rather than be annexed by France.
While Monaco is not a member of the European Union, its relationship with France means that its borders and customs territory are treated as being part of France, and as such it is a member of the Schengen area and is officially permitted to use the euro as its currency and mint its own euro coins.
