On Earth, As It is in the Vatican: Vatican City’s Financial Crisis Looms

 /  May 19, 2021, 9:28 a.m.

st peters
St. Paul statue outside of St. Peter's Basilica, 2016.

Vatican City, the paramount symbol of papal power worldwide, is undergoing an acute, earthly dilemma. A microstate of under one thousand citizens that one can walk completely around in just forty minutes, Vatican City may not be a traditional actor in the international state system, but it is not immune to the economic and political trials of the pandemic. Pope Francis, both the pope and King of Vatican City, recently assembled his economic advisors to issue several reforms aimed at reducing the 49.7 million euro, COVID-19-induced fiscal deficit. Some initiatives resemble modest fundraising efforts one might see in any church, like the Vatican’s online donations page, Peter’s Pence

But a look beyond online offering baskets shows that Pope Francis has also initiated sweeping austerity and anti-corruption measures that will reorganize his relationship to high-level religious officials within the Vatican. Whether these new reforms will save the Vatican—or whether it will buckle under the weight of economic recession and structural upheaval—will shape the trajectory of the Catholic Church itself. 

Pre-Pandemic Financial Scandals

While COVID-19 may have unveiled the Vatican’s financial burdens, the story of the Vatican’s economic crisis begins with endemic corruption. Since coming to power in 2013, Pope Francis has issued several Motu Proprio— similar to a US presidential executive order—that aim to reign in Vatican officials’ investments abroad. The most recent Motu Proprio in April 2021 demands pledges from high-level Vatican officials that they have not engaged in corrupt economic investments. This Motu Proprio coincides with a document called the “General Regulations of the Roman Curia,” which bans anyone employed by the Vatican State from accepting monetary donations greater than €40. While this Motu Proprio appears little more than a loyalty pledge, the accountability it seeks to establish will be critical to preventing further harm to the Vatican’s treasury and global legitimacy. 

The Vatican’s 170 million square acres of property worldwide, along with their $10-15 billion warchest in total investments and wealth, pad their yearly budget, and have led to several mishaps for the Church in the past. In January, a Vatican court found the former president of the Vatican bank, Angelo Caloia, guilty of twenty years worth of money laundering. Specifically, over twenty years, Caloia undersold twenty-nine of the Vatican’s buildings across northern Italy for prices substantially below market value; then, Caloia would receive a sum of cash that would make the building purchase equal to the market value. In so doing, Caloia defrauded the Vatican of 34 million euro. Pope Francis’s current wave of Motu Proprio declarations seeks to halt such insider deals by giving himself more direct oversight in the Vatican’s investment portfolio. 

To contextualize such stunning orders, it is important to understand how the Vatican conducts its finances. Typically, the Vatican will work through investment managers who pool Vatican funds into different business ventures—and therein lies the crux of the issue: investment managers do not have the moral and religious sensibilities of Church leaders, who in turn lack the acute economic instincts of investment managers. 

For example, in October of 2020, the Vatican’s most senior investment manager, Enrico Crasso, was found guilty of using millions of dollars in Vatican charity funds for speculative investments and loans. Crasso, the former head of the Vatican-financed Centurion Global Fund, invested in a slew of far-flung ventures: Elton John’s biopic Rocketman among them. As a result of his profligacy, Crasso caused Vatican City’s entire investment portfolio to dip by 4.6 percent in the 2018 fiscal year. As recently as April, the Vatican was reported to have invested 20 million euro into Swiss pharmaceutical companies that produce the “morning-after pill,” a retroactive contraceptive fundamentally at odds with the Vatican’s pro-life teachings. The lack of oversight on these investments reveals several blindspots in financing that run in diametric opposition to official church doctrine. 

The Inflection Point in Corruption

When Pope Francis professed in 2018 that “there is corruption, we can see it,” he foreshadowed the Vatican’s current financial crisis: while it may be COVID-19 induced, it is exacerbated by a history of financial corruption. Francis’s 2018 remarks preceded an extortion scandal that would bring to light the cardinals’ undue influence over the Church’s finances. In late 2018, the Vatican decided to work with businessman Gianluigi Torzi to acquire a luxury building in the expensive neighborhood of Chelsea, London despite Torzi’s name being on the WorldCheck anti-corruption database watchlist. After the acquisition, however, Torzi—who officially purchased the property for the Vatican—threatened to keep the property for himself unless he was provided both financial benefits from the Vatican and a private meeting with Pope Francis himself. 

While it is unclear how many Vatican officials were aware of Torzi’s extortion, Torzi was arrested under charges of extortion in June 2020. Pope Francis emerged from the Chelsea scandal determined that it would never repeat; its legacy is visible in the Vatican’s current austerity budget, in which the pope’s efforts to restrict the financial power of the cardinals are a central goal.

The Current Financial Crisis

Bearing in mind previous Vatican financial mishaps, Pope Francis is now overseeing the sharpest decline in Vatican revenue in modern history and has prepared a national austerity package in response. While the International Monetary Fund and World Bank have discouraged austerity measures, which would cut welfare spending and unemployment benefits to offset income losses, Vatican economists argue that the Vatican is a special case where austerity is unavoidable. The pope’s economic advisor, Juan Antonio Guerrero Alves, provides a twofold rationale for the proposed austerity measures: first, tourism is the primary income-generator for the Vatican, and, secondly, the Vatican does not have an income tax. The Vatican relies on ticket revenue from the Vatican Museums (principally the Sistine Chapel), all of which—like museums around the world—are at risk of bankruptcy solely due to the past year’s tourist slump. By the degree to which Vatican City relies on museum revenue, the Vatican may be thought of less like a tourist country, and more like a large museum with a state attached. 

As to Alves’s second point, the Vatican is barred from raising money via income taxes. Due to its small population and religious foundation, the Vatican has not and will not consider raising money through the imposition of income taxes. Further, the Vatican’s one thousand permanent residents also receive wages from the Vatican treasury: this means Vatican citizens only receive money from the Vatican, they do not pay anything material to the Vatican. As of now, the Vatican is expecting a deficit of €49.7 million: a daunting fiscal burden that could impede the Vatican’s operations for years to come. 

Prospective Solutions

With the Vatican’s current dire financial straits, the pope’s recent cost-cutting reforms indicate an openness to thrusting the Church’s financial burdens onto the cardinals, leading dignitaries who aid in the election of Pope and the interpretation of Church doctrine. Due to their senior status, cardinals often will oversee foreign delegations and the financial affairs of the Vatican. In carrying out these reforms, Pope Francis opens himself to criticism from high-ranking Vatican officials already disgruntled at restrictions on their investment opportunities and autonomy at large. Pope Francis has already had to deal with rebellious cardinals during his time in the Papacy, most famously US Cardinal Raymond Burke met with far-right Italian politician Matteo Salvini despite Pope Francis’s explicit disapproval of cardinals having private meetings with politically extreme figures. 

The pope has imposed a 10 percent pay cut on all cardinals, and to a lesser extent to clerics and nuns as well. Importantly, the reforms include unique stipulations designed to protect the most economically vulnerable employees on the Vatican payroll: any employee dealing with expensive medical bills will be exempt from these income cuts, and Pope Francis has guaranteed no layoffs for Vatican Museum employees. This order is clearly demonstrating goodwill to vulnerable Vatican employees, but these pay cuts all carve out money cardinals used to enjoy for their own private discretion. Alongside the pay cut, Pope Francis has canceled non-essential renovation work to the Vatican’s expansive complex of historical buildings and encouraged less travel for Vatican officials. Specifically, Pope Francis also ordered a halt to purchasing furniture for Vatican properties: indicating Pope Francis is breaking with predecessors and establishing a firm oversight over Vatican properties. 

In April of 2021, Pope Francis also issued a forward-looking Motu Proprio that allows cardinals and bishops under investigation for corruption first to be tried in a court of first instance (to wit, the court where the offending act initially occurred). At first blush, this order appears modest, but it is in fact a major inflection point in the relationship between the pope and his cardinals. While cardinals have historically faced charges in the Corte de Cassazone—the Vatican Supreme Court—they must now be tried like regular citizens. This order effectively strips judicial privilege from cardinals and bishops. 

The challenge with such a sweeping order as this is that it continues to foment tension between the pope and cardinals: Pope Francis’s mission to combat corruption places cardinals and bishops under ever-tighter scrutiny. It has yet to be revealed whether this fissure will expand into a greater conflict, but this tension nevertheless persists as Pope Francis undertakes these sweeping reforms. Just recently, in September of 2020, Pope Francis forced the resignation of cardinal Giovanni Becciu: the former chief of staff to Pope Benedict XVI. This resignation—which came in the late evening in a one-sentence statement—demonstrates Pope Francis’s tense, unceremonious relationship with the cardinals. 

Looking Forward

Pope Francis has one of the most unique economic crises in modern history on his hands. The Vatican’s deficit is of symbolic, economic, and political relevance to billions of onlookers across the world: not only do the Vatican’s reform measures impact the faithful, but they also will determine how seriously other countries take the Church’s formal statements. Pope Francis’s hierarchical reorganization potentially could reorient the entire role of cardinals and bishops in relation to Papal power: ushering in a new era in the Church where the pope is even more synonymous with the Catholic Church. It is no secret that Pope Francis is eager to illuminate current human rights dilemmas—which he did most recently in his visit to Iraq—and having a cloud of financial scandal following his retinue would only undermine his humanitarian missions. Since his ascendancy in 2013 to the papacy, Pope Francis has become a strong voice in preventing corruption among Vatican higher-level staff; nevertheless, this tension between him and his Cardinals will only produce more strife as Pope Francis attempts to control the Vatican’s ballooning deficit. Due to the Vatican’s lack of taxation measures, it means that deficit control will have to occur via two channels: austerity and donations from the faithful. 

Despite the challenges facing the Vatican, Pope Francis appears determined to marshall his economic advisors to produce a long-term Vatican budget that promotes fiscal prudence and deters corruption. In the coming years as the world recovers from COVID-19, the Vatican will become an even more salient focal point for a world looking for a sense of religious community; however, the Vatican must be financially stable to remain such a salient, spiritual religio-political entity. 

The image featured in this article is licensed for reuse under the Creative Commons Attribution-NonCommercial-ShareAlike 2.0 License. No changes were made to the original image, which was taken by Joe Shlabotnik in 2016 and can be found here

Christopher Delgado


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