San Marino is a republic that has preserved some very ancient traditions that additionally attract tourists to the country. Although it has been greatly influenced by modern political developments in surrounding Italy, it also has been spared some of the turbulent moments in its larger neighbor's contemporary history. It is democratic and neutral, and even more sensitive than ever to the importance of liberty. San Marino is governed according to a constitution adopted on 8 October 1600. A newer electoral law of 1926 and a "Manuscript of Rights" of 1974 also serve some of the functions of a constitution. San Marino claims to be the world's oldest surviving republic, founded by Saint Marinus in 301 A.D. Its foreign policy is aligned with that of Italy, and the social trends in the republic also follow closely with those of its neighbor.
The executive authority comprises the 2 Captains Regent, the traditional co-heads of state, who are both members of the parliament and elected by that body; a Congress of State (cabinet), also elected by the parliament; and a senior Secretary of State for foreign and political affairs, who acts as the traditional head of government. In their tenure, the Captains Regent preside over the deliberations of the executive body, the Congress of State. Every 6 months, the Sammarinese parliament elects new Captains Regent—traditionally from opposing parties to provide checks and balances. Their investiture (inauguration ceremony) takes place on 1 April and 1 October of every year and is accompanied by a centuries-old ceremony. Once their term is over, Sammarinese citizens have 3 days in which to file any complaints about the in-office activities and behavior of out-going Captains Regent. If so warranted, judicial proceedings against the ex-heads of state may be initiated.
The legislative power is vested in a unicameral (having 1 chamber) parliament, a 60-member house named the Grand and General Council that is elected by universal suffrage for a term of 5 years. The electoral body once comprised the heads of the Sammarinese families exclusively, but it was gradually extended to include all citizens over 18 years of age.
Italian magistrates, for both historical and social reasons of impartiality, have staffed the judicial system. The only native Sammarinese judges are the several Justices of the Peace, who may handle only civil cases in which disputed sums do not exceed 25 million lire (about $15,000). The traditional local Council of the Twelve serves as the highest court of appeals. It is elected by the Grand and General Council for the duration of the legislature.
The political parties in San Marino are traditionally very close to those in Italy, particularly the Christian Democrats, Socialists, and Communists. In the 1990s, however, among a series of disruptive political scandals, the Italian post-war political system was discredited and finally collapsed. A more complex and diversified system of new parties and alliances emerged from its debris. The centrist Christian Democratic Party, part of all ruling coalitions after 1948, dissolved and its members formed 2 new organizations, the Popular Party and the Christian Democratic Center. The new Democratic Party of the Left became the major left-wing party, including the majority of the reformed communists and many socialists. A smaller leftist group, the Communist Refoundation, retained some of the traditional Marxist policies, characteristic of the old communist party. The numerous Sammarinese political groups of the late 1990s accordingly included the conservative Democratic Christian Party (PDCS), the Progressive Democratic Party (PPDS), the Popular Democratic Party (APDS), the left-of-center Socialist Party (PSS), and the Communist Refoundation (RC), plus several other smaller groups, such as the Democratic Movement, the Popular Alliance, and the Socialists for Reform. Due to the small size of San Marino's population and electorate, no party has gained an absolute majority, so the government is usually run by a coalition. The parties sharing power currently are the Democratic Christian Party and the Socialist Party, but for several decades after World War II, San Marino was the only European country outside the Soviet sphere of influence ruled by a communist - socialist coalition. The elections held on 31 May 1998 (the next elections are to be held in May 2003) gave PDCS 40.8 percent of the popular vote, PSS received 23.3 percent, and PPDS had 18.6 percent. The composition of the current parliament and the Captains Regent reflects the stable economic situation in San Marino arising from having one of the lowest unemployment rates in Europe, a stable budget surplus , and zero national debt .
The role of the government in the economy is significant, although San Marino has developed a mature market economy. In the late 1980s, annual government revenue and expenditure were balanced at about $183 million, and since then the budget has accumulated a surplus. The state executive congress (cabinet), composed of 3 secretaries and 7 ministries, oversees the most vital economic activities, including those of the state-run Philatelic and Numismatic Office (stamps and coins). The government relies not only on tourism, taxes, and customs for revenue, but also on the sale of coins and stamps to collectors from throughout the world. In addition, the Italian government pays San Marino an annual budget subsidy provided under the terms of its basic treaty with Italy. The main issues facing the current government include economic and administrative problems related to San Marino's status as a close financial and trading partner with Italy while at the same time remaining officially separated from the EU.
Despite the tiny size of San Marino, it is an active player in the international community, with diplomatic ties to more than 70 countries. San Marino is a full member of the United Nations (UN), the International Court of Justice, the UN Educational, Scientific and Cultural Organization (UNESCO), the International Monetary Fund (IMF), the World Health Organization (WHO), the World Tourism Organization (WTO), the Council of Europe, the International Red Cross Organization, and the International Institution for the Unification of Private Law (UNIDROIT), among others. It also cooperates with the UN Children's Fund (UNICEF) and the UN High Commissioner for Refugees, and has official relations with the European Union. From May to November 1990, San Marino held the rotating presidency of the European Council of Ministers.