Let us examine these eight criteria in regard to the Vatican City, a tiny (the smallest in the world) country located entirely within the city of Rome, Italy. The Vatican City is the headquarters of the Roman Catholic Church, with over one billion adherents worldwide.
1. Has space or territory that has internationally recognized boundaries (boundary disputes are OK).
Yes, the Vatican Citys boundaries are undisputed even though the country is located entirely within the city of Rome.
2. Has people who live there on an ongoing basis.
Yes, the Vatican City is home to approximately 920 full-time residents who maintain passports from their home country and diplomatic passports from the Vatican. Thus, it is as though the entire country is composed of diplomats.
In addition to the over 900 residents, approximately 3000 people work at the Vatican City and commute into the country from the greater Rome metropolitan area.
3. Has economic activity and an organized economy. A country regulates foreign and domestic trade and issues money.
Somewhat. The Vatican relies on the sale of postage stamps and tourist mementos, fees for admission to museums, fees from admissions to museums, and the sale of publications as governmental revenue. The Vatican City issues its own coins.
There is not much foreign trade but there is significant foreign investment by the Catholic Church.
4. Has the power of social engineering, such as education.
Sure, although there arent a lot of kids there!
5. Has a transportation system for moving goods and people.
There are no highways, railroads, or airports. The Vatican City is the smallest country in the world. It only has streets within the city, which is 70% of the size of the Mall in Washington D.C.
As a landlocked country surrounded by Rome, the country relies on the Italian infrastructure for access to the Vatican City.
6. Has a government that provides public services and police power.
Electricity, telephones, and other utilities are provided by Italy.
The internal police power of the Vatican City is the Swiss Guards Corps (Corpo della Guardia Svizzera). External defense of the Vatican City against foreign enemies is the responsibility of Italy.
7. Has sovereignty. No other State should have power over the country's territory.
Indeed, and amazingly enough, the Vatican City does have sovereignty.
8. Has external recognition. A country has been "voted into the club" by other countries.
Yes! It is the Holy See which maintains international relations; the term "Holy See" refers to the composite of the authority, jurisdiction, and sovereignty vested in the Pope and his advisers to direct the worldwide Roman Catholic Church.
Created in 1929 to provide a territorial identity for the Holy See in Rome, the State of the Vatican City is a recognized national territory under international law.
The Holy See maintains formal diplomatic relations with 174 nations and 68 of these countries maintain permanent resident diplomatic missions accredited to the Holy See in Rome. Most embassies are outside of the Vatican City and are Rome. The other countries have missions located outside Italy with dual accreditation. The Holy See maintains 106 permanent diplomatic missions to nation-states around the world.
The Vatican City/Holy See is not a member of the United Nations. They are an observer.
Thus, the Vatican City does meet all eight criteria for independent country status so we should consider it as an independent State.