Prince Rainier III, 81; Ruler Transformed Monaco, Made Grace Kelly His Princess

Prince Rainier III of Monaco, who made Hollywood beauty Grace Kelly his fairy-tale princess and transformed his tiny Riviera realm of casinos and resorts into a powerhouse of international banking and business during a 56-year reign, died Wednesday. He was 81.

Rainier died in a Monaco hospital, just a month after he was admitted with a lung infection, according to an announcement from the palace.

His only son, Prince Albert, 47, was at his bedside when Rainier died. The announcement did not indicate if Rainier’s daughters -- Princesses Caroline, 48, and Stephanie, 40 -- were also with him at the time of his death.

Europe’s longest-reigning monarch had been in and out of the hospital over the last year for a chest infection, coronary problems and general fatigue. He also had undergone surgery in late 1999 and 2000 and was hospitalized in November 2002 for a chest infection.

Rainier’s body was moved to his hilltop palace where it will lie in state. The funeral will be held April 15 at the principality’s cathedral, Monaco’s government said. The Mediterranean enclave’s famed Monte Carlo casino closed its doors Wednesday in a sign of respect.

Prince Albert took over the royal powers last week after it was determined that Rainier was too ill to rule. After a mourning period, there will be a formal investiture and he will take the title Prince Albert II.

“It’s a proud principality, altruistic and confident in its future, that I would like to leave for him,” Rainier said at ceremonies in 1999 that marked the 50th anniversary of his coronation. His family has ruled Monaco more than seven centuries.

The prince, long one of the world’s most dashing men, never remarried after the death of his wife in 1982.

Rainier often said Monaco was so small that he was “probably the last head of state to be able to recognize all his compatriots in the street.”

Most Americans and much of the outside world would not have known much about him and his country if not for Kelly, the millionaire contractor’s daughter from Philadelphia who left Hollywood at the top of her profession when she fell in love with the prince.

Rainier and Kelly’s marriage in 1956, one of the most publicized events of the 20th century, marked the union of two elites: the lithe and coolly elegant actress who had won the 1954 best actress Oscar for “The Country Girl” and the handsome, mustachioed scion of one of Europe’s oldest reigning families.

It was said to be love at first sight. But it was not an easy marriage, and it happened only after hard negotiation. During their 26-year union, the prince and princess reportedly always slept in the same bed, but visitors to their pink palace on a rock overlooking the Mediterranean said they often heard loud arguments.

Rainier Louis Henri Maxence Bertrand de Grimaldi was born on May 31, 1923, in Monaco, a hilly enclave on the Mediterranean nine miles east of Nice, France. He was the only son of Count Pierre de Polignac, a member of the French nobility, and Princess Charlotte of Monaco.

The prince was educated in Britain, Switzerland and France. In World War II, he enlisted in the French army. He was cited for bravery and offered the rank of colonel. After the war, he attended university in Paris.

He ascended to the throne after maternal grandfather Prince Louis II abdicated in 1949 because of ill health. And Rainier quickly began the search for a wife.

During a photo shoot organized by the Cannes Film Festival in 1955, he briefly met Kelly, six years his junior. The prince, it was said at the time, was smitten.

For months, Rainier tried to arrange another encounter. On Christmas 1955, the prince, his priest and his doctor were invited to dinner at the Kelly family’s home in Philadelphia. Grace’s father, former Olympic rowing champion Jack Kelly, had made millions as the owner of a construction company.

According to biographers of Grace Kelly, tough bargaining ensued. Rainier needed a wife who could have children because, under a 1918 treaty with Paris, the principality would revert to France if his bloodline died out. He demanded that Kelly submit to an examination by his physician to prove that she was capable of bearing him an heir.

Also, showing the shrewdness in business for which he would become known, the prince asked Jack Kelly to give him a $2 million dowry -- in advance. The construction magnate reportedly balked, so the bride-to-be ended up paying half, according to several biographies of Kelly.

After a courtship of less than two weeks, Rainier and Kelly announced their engagement. Before marrying, though, she had to fulfill her contract with MGM by starring in “High Society.” A week after filming ended, she set sail for Europe, accompanied by an entourage of friends and relatives.

On April 19, 1956, the star and the prince were married in a three-hour public wedding at Monaco’s Cathedral of St. Nicholas. The ceremony was watched by 30 million television viewers, a large audience for the time. In glamour and star power, the event was the equal of another royal wedding yet to come, that of Charles, Prince of Wales, and Lady Diana Spencer in 1981. Kelly wore an $8,000 ivory dress by Hollywood designer Helen Rose.

Rainier had insisted from the start that his bride give up her career to focus on her duties as a princess, and by some accounts Kelly may have hoped that MGM would refuse to go along. But the studio agreed, in exchange for world rights to a documentary about “The Wedding of the Century.”

Cultural differences and the demands of Rainier’s family made the union of the Old World aristocrat and the American movie star less than a storybook marriage. According to a recent biography of Princess Grace by J. Randy Taraborrelli, when Rainier refused to let his wife return to the screen in Alfred Hitchcock’s “Marnie,” she suffered severe depression.

But over the years, according to Taraborrelli, they forged a relationship of respect and mature love. Kelly once said that it was their common Roman Catholic faith, as well as her conviction that a woman’s rightful role was as “pillar of the family,” that kept the marriage intact.

The couple had two daughters -- Caroline, born in 1957, and Stephanie, born in 1965. Prince Albert Alexandre Louis Pierre was born in 1958.

Twenty-four years later -- on Sept. 13, 1982 -- Rainier lost his consort in a road accident. As the 52-year-old Kelly was driving with Stephanie back to the palace in Monaco, Kelly suffered a stroke. The car veered off the road and plunged down a steep embankment, turning over several times and crushing the driver’s side of the vehicle.

Stephanie, though seriously injured, survived. Kelly went into a coma and died the next day after Rainier, Caroline and Albert agreed to allow life-support equipment to be switched off.

Rainier and his children, as well as the principality, were plunged into mourning. The prince was 59.

Early in his reign, the prince had concluded that it was risky to allow Monaco’s economy to rely on roulette, baccarat and the other games of chance that had established its reputation as a destination for Europe’s rich in the 19th century. He set out to make his realm a haven where the wealthy would come to do business and invest as well. His success was spectacular.

When Rainier assumed the throne May 9, 1949, at age 25, the mini-state derived 90% of its income from casinos catering to European royalty and the “beautiful people.” By the time of his death, that figure was down to about 4%.

When Monaco celebrated Rainier’s 50th year in power, his homeland was doing $6 billion in tourism, financial services and annual trade. The principality now has no peer on the Mediterranean coast for per capita wealth, quality of public services and concentration of development in such a confined space.

“It is not necessary to cover a large territory to have big dreams, nor to have a large population to make them come true,” Rainier once said.

Under the ambitious and meticulous guidance of a sovereign known as the “builder prince,” Monaco even grew in size by a fifth, to its current area of nearly 1 square mile, as landfill projects reclaimed some of the Mediterranean. In 1993, the principality was admitted to the United Nations.

Rainier’s family, the Grimaldis, have held sway over the rocky chunk of French Riviera coastline for more than 700 years -- since Francois the Sly, disguised as a monk, sneaked into the fortress in 1297, overpowered the few guards on watch and let in his followers.

Monaco, which, as is often said, is small enough to fit into New York’s Central Park, is home to at least 44 banks. Its skyline is jammed with recently built high-rise apartment and office buildings that, in the words of one English critic, “all but obliterate the charm of the Belle Epoque architecture of the original Riviera resort of which the casino was the centerpiece.”

In 1967, Rainier took control of the Societe des Bains de Mer, operator of the celebrated Monte Carlo casino, and moved to increase Monaco’s hotel and convention space. He even courted a more diverse gambling clientele by installing slot machines in the casinos for day-trippers on a budget.

Under Rainier, Monaco also earned further cachet as an Eden for the wealthy and glamorous from sporting events, including the Monaco Grand Prix motor race and an annual professional tennis tournament.

But growth was accompanied by persistent rumors that the longtime playground for millionaires was being used to launder illicit gains of the Italian Mafia, Middle Eastern drug dealers and, increasingly, Russian organized crime.

Under Rainier, the joke went, Monaco became “a sunny place for shady people.”

“The principality is a factory of false receipts and invoices. There is no control,” said Roger-Louis Bianchini, a retired French police investigator who wrote an expose of Monaco’s business practices. And the citizens of Monaco “have no interest in changing the system, because they profit from the money at a personal level. Monaco has no revenue of its own; if the money disappears and goes somewhere else, the principality will fall into poverty.”

Rainier’s realm, which has no income tax, became a tax haven for countless celebrities, from Italian tenor Luciano Pavarotti to Formula One race car drivers and tennis stars. Less than a sixth of the current population of 32,000 are native-born.

“Certain media have long been striving to turn Monaco into a myth, that of a superficial playground with no concern for the great causes of mankind,” Rainier complained. But with the principality stung by a 1992 payoff scandal, which involved Italian politicians and businesses and bared Monaco’s role as a conduit for illicit funds, some cleanup efforts were begun.

As Rainier’s daughters grew up, millions of people who had never been anywhere near Monaco read of the scandalous love affairs and messy divorces of Caroline and Stephanie, popular subjects for gossip columnists and paparazzi. Caroline is now married to Prince Ernst August of Hanover. Stephanie reportedly had a series of relationships, including one with Portuguese handstand expert and juggler Adans Lopez Peres.

Albert, a political science graduate of Amherst College in Massachusetts, is a hard-partying bachelor who has squired many beautiful women, including model Claudia Schiffer and actress Brooke Shields, but has shown no inclination to marry.

To ensure his dynasty’s survival, Rainier in 2002 quietly changed Monaco’s order of succession to allow his daughters and seven grandchildren to inherit the throne from Albert if he remains childless.

As the half-century mark in Rainier’s reign arrived, Paris-Match magazine, which has printed hundreds of photos over the decades of Monaco’s first family, asked him if he had been a “happy prince.”

“Yes. My only regret is to have not been available enough to take care of my children during their tender years, and it is too late to make up for lost time,” the sovereign said.