San Marino Lives on as Tiniest, Oldest Republic : Europe: The miniature nation has 24,000 inhabitants, 24 hotels, 53 restaurants, assorted castles and fortresses, a treasured letter from Abraham Lincoln--and U.N. seat.

In a country so small that much of it disappears from view on a foggy day, an old ceremony offers new dedication to independence and liberty.

Dressed in the velvet, ermine and lace habits of medieval office and flanked by the Noble Guard in blue and gold uniforms with plumed hats and glittering swords, a lawyer and an accountant are installed as the captains regent--the chief executives--of San Marino.

“The ceremony means a great deal to us,” said Giovanni Righi, a restaurant owner whose roots here go back seven centuries. “It is a reminder of who we are.”

Just who--or what--is San Marino? It is the world’s oldest (nearly 17 centuries) and smallest (24 square miles, the size of Manhattan) surviving republic.

Perched like a tiny button on the northeast side of the Italian boot, San Marino clings to the craggy slopes of 2,500-foot Monte Titano and encircles it on the Romagno Plain below.

The miniature nation has 24,000 inhabitants, 24 hotels, 53 restaurants, three movie houses, assorted castles and fortresses, a treasured letter from Abraham Lincoln, a bit part in Hollywood lore--and a seat in the United Nations.

According to local history, it was founded in 301 when a Christian stonemason named St. Marinus fled across the Adriatic Sea from Dalmatia to escape the persecution of Roman Emperor Diocletian.

Marinus took refuge about nine miles inland on Monte Titano, where he gave his name to a community whose only law guaranteed residents the freedom to practice their faith.

From that beginning, an independent republic evolved that has survived many crises, including occupation by Cesare Borgia and annexation attempts by Popes in the Middle Ages and an Italian fascist puppet government and a British bombing in World War II.

Along the way, the Sammarinesi, as San Marino citizens are known, decided that they could protect their democracy by not letting any leader rule alone or for very long. They set up a government headed by two captains regent, who serve only six months and cannot be reelected until three years after they leave office.

This spirit impressed both Napoleon and Abraham Lincoln. When the French general invaded Italy in 1797, he not only honored San Marino’s independence but offered it more territory. Fearing that would make them too tempting or threatening to more powerful neighbors, the Sammarinesi said, “No, thanks.”

In 1861 Sammarinese officials wrote President Lincoln, expressing sympathy over the troubles he was having and making him an honorary citizen. Lincoln replied:

“Although your dominion is small, your state is nevertheless one of the most honored in all history. It has demonstrated that government founded on republican principles is capable of being so administered as to be secure and enduring.”

Neutral in World War II, the Lilliputian nation provided a haven for more than 100,000 refugees from Italy and other European countries.

After the war, San Marino continued to go its own way, becoming the first country to freely elect a Communist government. Twelve years later it became the first to get rid of a Communist regime peacefully.

In mouse-that-roared fashion, San Marino sued Great Britain for $1.1 million for damages inflicted by a wartime bombing raid. The British, saying that the bombing occurred because San Marino lay along the German supply route into Italy, offered $72,000, to which the proud Sammarinesi again replied, “No, thanks.” The suit eventually was settled for about $250,000.

Over the years, San Marino has come up with some creative ideas for generating income.

For a while, it sold titles. Anyone with the cash could buy a dukedom for about $25,000 or become a marquis for $16,700.

Colorful postage stamps--portraying everything from signs of the zodiac to comic book characters--proved to be a bigger bonanza. One-fourth of San Marino’s budget was reported to come from stamp sales in the early 1940s.

Then there was the time in the ‘40s when the entire country was rented--lock, stock and battlements--to American producer Darryl F. Zanuck as the medieval setting for his swashbuckling film “The Prince of Foxes.”

Today San Marino blends the old and new. Although half of its land is still under cultivation, small industries and tourism have become the leading sources of income.

The capital, also called San Marino, sits atop Monte Titano. It is full of narrow cobblestone streets, massive brick-and-mortar towers, charming cathedrals and crenelated walls.

It is also filled with souvenir shops that serve about 3 million tourists a year.

Despite its size and landlocked location, San Marino isn’t isolated. It sends teams to the Olympics; a Sammarinese butcher once led in rifle competition for a day. It signed a treaty promising that its ceremonial army wouldn’t use nuclear weapons, and in 1992 it became a full member of the United Nations.

“We are a small country, but we feel part of the world,” explains Emma Rossi, minister of education and president of the Socialist Party.

San Marino maintains close ties to Italy, while emphasizing, “We are not Italian.” There are no border restrictions, and Sammarinesi use Italian currency, appoint Italians as judges and speak an Italian dialect.

“The biggest difference between the countries,” restaurateur Righi says, “is that life is gentler here. If you want to renew a license or get a passport, you just go and do it. At night here you can leave your door open and walk anywhere. Everybody knows you.”

And everybody knows politicians. Many of the more than 11,000 Sammarinesi who have emigrated to other countries, mainly Italy and the United States, continue to participate in San Marino’s elections. The government even helps pay expenses to bring absentee voters home.

Philip Valentini, who left San Marino in 1952 when he was 15, returned this year from Garden City, N.Y., with his wife, Jeanne, to vote and see old friends.

“I like being part of this tradition,” he said. “I’m very proud of this country.”