A tragic Prince Charming

Monaco is one of the strangest countries in the world, a tiny relic of the Middle Ages, measuring less than two square kilometres, ruled by the same family for 700 years. It is a sun-kissed mini-state, both glamorous and hermetic at the same time, the playground of celebrities, high-roller gamblers, and a tax haven for secretive tycoons.

Sandwiched on three sides by France, with the Alps in the background and the azure twinkle of the Mediterranean in the foreground, the principality is waiting for the next chapter in its unusual history to unfold as its patriarch declines.

When Prince Rainier, 81, Europe's longest-reigning sovereign, was put on life support with respiratory problems, relatives began a bedside vigil, along with Monaco's archbishop, Bernard Barsi, and the parish priest of the principality's cathedral. And Europe's celebrity press, like vultures eyeing a faltering animal, began preparing their special editions.

Rainier has been a shrewd ruler, but a man battered by personal tragedy and family scandal. He is credited with a 55-year reign that has sweepingly changed his tiny kingdom.

In 1949, the 26-year-old Rainier - more exactly Prince Rainier Louis Henri Maxence Bertrand de Grimaldi - succeeded his grandfather, Louis II, to become the dynasty's 31st ruler. The Grimaldi family traces its rule to 1297, when a buccaneer, Francois Grimaldi, seized the Fortress of Monaco from Genoa, the city that was the great power in the Mediterranean at the time.

Within a few years of Rainier's ascent, the sleepy principality - known mainly for postage stamps, spa baths and a stately casino - was placed on the world map.

In an event that set the tone for modern Monaco, and the foundations of the modern celebrity media, Rainier married the beautiful Hollywood actress Grace Kelly.

Their wedding in 1956 was a Disneyesque event watched by a record 30 million television viewers. Royal servants strewed the cathedral with white lilacs and lilies for the marriage service. As European royals, Hollywood stars and political VIPs gaped, Princess Grace made her entrance in a Renaissance-style wedding gown - paid for by Metro-Goldwyn-Mayer - with a 290m train of Valenciennes lace. Nothing, it seemed, could go wrong in this fairytale kingdom.

In 1957, Rainier and Grace had their first child, Caroline. A year later, Albert was born. Their third baby, Stephanie, came in 1965.

In the meantime, helped by his glamorous, energetic wife, Rainier set about transforming the kingdom. The dynasty set up the Monte Carlo Television Festival, Europe's top annual television event.

Its radio station, Radio Monte-Carlo, named after one of the principality's five districts, deployed giant transmitters to reach listeners across France and Italy.

A tennis tournament, the annual Formula 1 Grand Prix, and the famous casino - a backdrop for the James Bond films - added glitz and lured the punters.

The annual Rose Ball, marking the arrival of spring, became the glitziest event in the European socialite calendar - Rainier's absence this year was a tip to the press that his health was worsening.

Rainier also made radical moves to change Monaco's economy. He reclaimed land from the sea to expand Monaco's area by a fifth and allowed the building of high-rises. Rainier also wrested full control of the Societe des Bains de Mer (Sea Bathing Society), founded by his forebears in 1863, which, despite its cute Victorian name, is the economic power in Monaco. The SBM owns the Monte-Carlo Casino and three other casinos, and operates four luxury hotels, 20 restaurants and nightclubs, plus shops, a health spa, a conference centre and a golf course.

Rainier, more controversially, liberalised the principality's taxation, corporation and banking laws, a move that has transformed Monaco into a fiscal paradise. More than 4500 companies, 60 of them banks, are registered in Monaco. There is no tax on income, capital, investment transfers or share transactions. As a result, Monaco is incredibly wealthy. Monaco's coins are so rare that a mint set sells for nearly 800 ($1450) compared with less than 17 ($30) for a set stamped by another eurozone country.

The enclave also has one of the most diverse populations, by nationality, in the world. It has 32,000 residents, but only 6000 are native Monegasques. About 10,000 are French and 6500 are Italian. The rest are drawn from 120 different nationalities, most of whom take up residence to avoid paying taxes in their home countries.

For his efforts, Rainier was dubbed in the respectful Monaco media as "the builder prince". France, though, regularly growls at Monaco, worrying that its liberal laws have made it a lure for criminals and money-launderers.

In 1982, the Grimaldi fairytale evaporated when Princess Grace died in a car crash. At the funeral, Rainier sat before her mahogany coffin, his face twisted in a grief and bewilderment from which he never fully recovered.

Yet barely had Princess Grace been buried than rumours began to spread in the press that she had been an alcoholic. The two princesses became fodder for the paparazzi, and the French press ran the most salacious stories.

First in the firing line was Caroline, who married an older playboy, Philippe Junot, in a lavish wedding in 1978 attended by 600 guests, including her mother's old chums Gregory Peck and Frank Sinatra. In 1980, the couple divorced. In 1983, Caroline fell in love with 23-year-old Italian Stefano Casiraghi, the son of a wealthy businessman. They married hastily in a civil wedding - a religious wedding was impossible because of her earlier divorce, and Catholicism is Monaco's state religion. Three children were born from their union. In 1990, Stefano was killed in a speedboat racing accident.

Torn by grief, the young widow retreated to a quiet villa in France, re-emerging in 1993 when she took up with Prince Ernst-August of Hanover, a descendant of King George III and a volatile personality in his own right.

Stephanie is the family's wild child. Her life has been dogged by the loss of her mother and a string of love affairs that dug deep rifts with her father.

"Not only did I go through the horrible trauma of losing my mother at a very young age but I was beside her at the moment of the accident," she said in 2002, ending a 20-year silence about the tragedy. "Nobody can imagine how much I've suffered, and still suffer."

In 1991 she began dating her former bodyguard, Daniel Ducruet, whose girlfriend was six months pregnant with his child. In 1995, after having two children, Daniel and Stephanie married. But they divorced 18 months later when Daniel was photographed in a compromising situation with Miss Nude Belgium.

In 1998, after dabbling in fashion and singing, Stephanie gave birth to her third child, whose father has never been identified.

After that, she had a liaison with a married elephant trainer, and moved in with him, along with her three children, to live in a caravan. In 2003, she privately married trapeze artist Adans Lopez Peres, but he moved out less than a year later.

Over the years, the Grimaldis have fought dozens of legal battles on the grounds of libel and invasion of privacy, some of which have resulted in law changes in France and Germany.

Monaco's future will now depend on Albert, who will ascend the throne under an article in the constitution that names succession through the male line.

Rainier long groomed his son for the job, sending him to the United States for higher education, including business studies, then to France to do military service in the French Navy. Albert then undertook a succession of roles as Monaco's representative overseas.

Just as Rainier was named "the builder prince", Albert is called "the sporting prince" for his athletic prowess - he is a judo black belt - and promotion of sports.

But Albert, at 47, shows no inclination yet of wanting to marry or have children, although his name has been linked with some glamorous and beautiful women, including model Naomi Campbell.

"I know the time will come when I'll have to think about becoming a family man," he said in 1998.

Until then, he said, he would follow dictates of his heart, and not of the state - a modern man burdened with centuries of ancestry.