What is the only country in the world where private property does not exist? North Korea? Cuba? Belarus? None of that: The Vatican.
And, to make matters worse: Who has been one of the most relevant financial advisors of the Vatican?
Brace yourself: Michel Camdessus, a French socialist and former Managing Director of the International Monetary Fund (IMF) who, after leaving office in 2000 —having overseen the transformation of Russia from communism to capitalism and dealt with the emerging market crises of 1997 and 1998— left Washington to try to help the finances of the seat of St. Peter, then occupied by Pope John Paul II, socially conservative but, as much as we may have forgotten today, very left-wing economically.
Having a former IMF Managing Director advising a country where there is —and will not be— a single private business sets the tone when examining the Vatican finances. Earthly financial laws only affect the Holy See in a very limited way. This is fortunate for the Vatican, as otherwise, it would be technically bankrupt.
This situation has worsened during the papacy of Francis, with some saying that he has driven away donors with deep pockets and the wealthiest religious institutions with his policies and statements. Particularly, members of groups not entirely aligned with Francis, such as Communion and Liberation, the Sodalitium of Christian Life (which was dissolved by Francis), or Opus Dei, may have reduced their contributions, according to sources. Others attribute this situation to what they describe as Francis' "interventionism," his lack of knowledge of the Roman Curia, where he had little support, and his own personality, which made him reluctant to work in a team. All of this led the Pope to try repeatedly to reform the Vatican finances. And he failed repeatedly. His concern has been reflected in two letters to the cardinals expressing his concern on this issue. But in the end, it remains unresolved.
In fact, the last thing the Pope did before being admitted to Gemelli Polyclinic on February 14 was to create the Commission for Donations to the Holy See, in order to revitalize that contribution from religious organizations and dioceses, commonly known as the 'Peter's Pence', whose revenues have reportedly dropped from 80 million euros annually under Benedict XVI to 40 million under the recently deceased Pontiff, according to some sources consulted by this newspaper. For some, the creation of that Commission has been an example of the financial problems of the Holy See: it was opaque, its responsibilities are unclear, and above all, no one knows its objectives. Is it about restoring Peter's Pence to where it was under Benedict? Slowing its decline? Bringing it to an intermediate level between Benedict and Francis?
Vatican Public Accounts
The management of Vatican accounts is anything but transparent. In fact, Francis encountered the scandal of the Sloane Avenue building in London, a former warehouse of the luxury department store Harrod's that the Holy See acquired 45% of the capital in 2013 through an investment fund. However, the building was not owned by the Vatican but by the Vatican's Secretariat of State, as surreal as a Ministry acquiring a property that becomes its own, but not the State's. When the Holy See took over ownership in 2018, a money laundering scheme carried out with it by the fund's owner, Raffaele Mincione, was uncovered, leading to his conviction to five and a half years in prison by the Vatican. Cardinal Angelo Becciu was also sentenced to the same penalty for document forgery. In the end, the Vatican recorded losses of approximately 150 million euros out of the 350 million it had to invest in the entire operation.
The Vatican's public accounts recorded a deficit of 83 million last year. Considering the Vatican's GDP is around 20 million euros, that technically represents a deficit of 400% of the GDP, a figure more than enough to cause a fainting spell to Camdessus or any of the ministers and officials gathered this week in another conclave, crucial for the global economy, which is the Spring 'summit' of the IMF. Of course, once again, this is not the economy of a normal country. The Vatican's budget is around 2,000 million euros annually, meaning that the State's expenses are 1,000% of the GDP. The Vatican economy is the Vatican State.
The deterioration of the public accounts under Francis is evident. In 2021, the Vatican City's deficit was only 33 million euros. Such a deterioration of public finances cannot be entirely attributed to the decline of Peter's Pence and seems to be a clear failure of the advisors to the Pontiff. This is even more pronounced when he made the reform of Vatican finances his main political action alongside 'zero tolerance' for clerical sexual abuse.
But the late Pope is only partially responsible for the Vatican State's deficits. The two main sources of income for the church, the United States and Germany, are in crisis. In the former, the massive compensations for clerical sexual abuse of minors have hit the accounts and, consequently, their contribution to Peter's Pence. In Germany, the problem is common throughout Europe: secularization.
The Catholic Church is a tremendously decentralized organization, where each order, secular institute, parish, basilica, hospital, university, or school has its own accounts. The result is absolute chaos, sometimes maintained and encouraged by elements in Rome itself, and in other cases by the top officials of these religious organizations. Catholic doctrine is full of problems of unfathomable complexity —transubstantiation, the Trinity, the Resurrection— but none seem as insurmountable as understanding its finances.
As explained by someone familiar with the situation: "Sometimes the accounts are managed by professionals comparable to any large company; other times, a poor priest balances the numbers as best as he can". Nothing better exemplifies this chaos than the fact that within the Vatican City alone, there are over 300 different financial entities.
Of the approximately 2,000 million that the Vatican has as a budget, around a quarter comes from the economic activities of the territory, such as the museums, which generate around 600 million in annual revenue, although their final profits are around 100 million.
The rest comes from two fundamental sources: religious foundations and the so-called "sovereign funds," which are the Vatican's investments in movable and immovable assets - including financial instruments - worldwide, although mostly concentrated in Rome. In that city, the Holy See has 5,000 rental apartments; in Paris, 500, some of which have been inhabited by, among others, former French presidents. Part of the Champs-Élysées is legally owned by the Vatican, although conversely, all churches in France —including Notre Dame— belong to the State, which grants perpetual use to the Catholic Church.
Those assets are managed by APSA (the acronym for Administration of the Patrimony of the Apostolic See), which also functions as the central bank, and which several issuing institutes, such as the US Federal Reserve, recognize as such. Even there, the Vatican once again has peculiarities. Although it is in the eurozone, it does not formally belong to the EU. However, it does mint euro coins, but not under an agreement with the European Central Bank (ECB), but with the Bank of Italy.
These are just some examples of the gigantic complexity of the legal structures of a decentralized institution, spread throughout the world, with 2,000 years of history in which it has gone through periods of merging with political power and periods of persecution, prohibition, and expropriation. And with legal complexity comes economic and accounting complexity.
Regarding expenses, the most problematic part is the curia, that is, the governing bodies of the Vatican and the Catholic Church. Practically by definition, these institutions do not generate income, in the same way that a Ministry does not have a regular source of funding, with the exception, of course, of the Treasury. For this reason, Francis, in one of his last acts as Pontiff, cut the salaries of the cardinals by several hundred euros - according to some, by 500 - to reduce that item. It is nothing more than a classic austerity measure, one that Camdessus himself would have applauded if it had been carried out by any emerging market when he was leading the IMF.
In a way, the city-state of the Vatican is economically self-sufficient; when combined with the Catholic Church, it incurs losses, mainly due to the curia. But in the Vatican's catacombs, there are some very dangerous financial monsters lurking, such as, for example, the imbalance of 631 million euros in its Vatican pension system, to which the approximately 4,000 workers of the Holy See contribute, which was discovered in 2022.