Pope Francis starts reforms. But perhaps he will need to rely on St. Peter’s Pence

It is rumored that the Peter’s Pence funds increased this year, and this news will certainly relieve Pope Francis. Peter Pence’s will give a breath of support to the Vatican operating funds,which are facing the always higher expenses of an elephantine curial machinery that needs to be streamlined. Not because of a theological-pastoral reform, but rather to survive.

Vatican reforms announced last July 9 seem to be more about a need for a spending review than moved by the real need for reform. It is thus understandable why, until now, only structural reforms have been discussed, while theological matters have been put aside, even fundamental issues like the Holy See Sovereignty.

In fact, it is not the time, yet, to discuss choices of profound meaning in order to redesign a more up to date Curia updating the Pastor Bonus, the 1989 apostolic constitution which regulates the functions of Vatican offices. There is rather the need of rationalizing, of – if possible – generating revenues, of projecting the Vatican administration and finances toward a future when the Holy See will be able to guarantee a pension even to the employees who will be working in the Vatican three generations from now. In order to achieve these goals, there is a need for experts, not theologians. Only history will tell how much the Holy See has sacrificed in evangelical influence and self understanding of its own mission by choosing the path of technical reform, with seemingly no larger vision behind it.

The real face of the reform

Between July 8 and 9, in only two days, Pope Francis’ reform showed its real face. On the 8th of July, the balance sheet of the Institute for Religious Works (namely the IOR, the so-called Vatican bank), as well as those of the Holy See and of the Governorate, were released. The IOR balance sheet was a break with the past and a milestone for the beginning of a new era.In a note released together with the balance sheet, the IOR declared phase 1 of its reform concluded, and affirmed that about 3000 accounts had been closed following an accurate screening (which was already ongoing before, as the MONEYVAL report certified). It also mentions a decision of the Council of Superintendence to restrict the categories of entities and people that can open an account, in effect since July 2013;  and highlighted that, out of the 3000 accounts mentioned above, 2600 were mostly dormant accounts while 396 were accounts that did not meet requirements. The note underscored that 359 accounts would be closed.

A clean up and rationalization plan put in action at an institute that – in the words of outgoing president Ernst von Freyberg’s words – «hid no unpleasant surprises, held no suspicious accounts.» In fact von Freyberg was stressing no more than what the Council of Europe’s MONEYVAL experts had already stated in their report, clarifying that the IOR in particular (and the Vatican in general) were not the places of illicit transactions and opacity described by the media. There was a need to project a new image of the Institute, one going beyond the antagonism that always takes place in a situation of reform and transition (von Freyberg took over his post in the difficult days following Benedict XVI’s resignation, while the – also news media – war for the Papal succession was already in the offing).

Von Freyberg chose to delegate the screening to the external consultants of the Promontory Financial Group, a firm universally deemed authoritative, even if criticized for its links with the U.S. financial-political world that, some said, madethe group a sort of shadow regulator of the market.Even the staff that took the place of the IOR previous general management, who resigned following a Vatican scandal which involved the institute, came from the Promontory Financial Group.

This decision also showed the other side of the coin. The new management did not follow the investment philosophy of the former management. Probably,the former investment portfolio had not been managed in the strict way required by markets, and usually in these cases the portfolio is  not diverse enough and suffers from an over-simplistic management. The IOR stressed that management «has identified a number of legacy investments which required extraordinary and precautionary write-downs in 2013,» and that part of the losses were an outcome of those write-downs. The fact is that the 2013 profit is of only 2,9 million euros, while the 2012 profit amounted to 86 million euros.  

The IOR has nevertheless made an effort, and given the Pope 54 million euros. Out of these 54 million, 50 covered the deficit of the combined balance sheets of the Holy See and theGovernorate (this latter being in the black, thanks to the Vatican Museums), and 4 million were assigned to religious works, i.e. for the Pope to give to charity.

The big reform of the Vatican economic structure

In the mean time, everything was ready for the big reform of the Vatican economy. Cardinal Pell has pushed strongly for it.  He defended the reform in the Council of Cardinals, more or less clashing with Cardinal Giuseppe Bertello, President of the Vatican City State governorate, and less intensely but anyway clearly with Cardinal Pietro Parolin, Secretary of State. The latter is always losing more influence and power, although the Pope told him that he is fully a member of the Council of Cardinals. Both Bertello and Parolin called for prudence in carrying the reform forward, and for greater appreciation of the Vatican’s special realm. Personal interests influenced them, as well. Bertello was supposed to be chosen to be the moderator curiae, but now he seems ever more sidelined. Parolin is the exponent of the gang of diplomats, the same people who have strongly resisted the Holy See international option, seeking to keep a privileged relation with the Italian State. This tension –between the international option and the Italian habitual rapport – was at the heart of many of the polemics and leaks of documents around Vatican finances.

And this tension was also at the heart of the leaks about the so-called “Maltese gang” that isfollowing the “German gang” in the management of Vatican finances. The Maltese gang is said to be headed by Joseph F.X. Zahra, number 2 of the Council for the Economy and former president of the Pontifical Commission of reference on the Vatican Administrative-Economic Structure, namely the COSEA. A banker who had worked as director of the Central Bank of Malta, Zahra knows Vermiglio, an Italian and fellow member of the Council, very well.  But Zahra is certainly not close to Jean-Baptiste Franssu, the French guru in the “mergers and acquisitions” and asset management branch.

De Franssu’s appointment was backed by Pell, together with a brand new board composed by six people (including the president). At the moment, the appointees to the new board are Mary Ann Glendon, former US ambassador to the Holy See and member of the Pontifical Commission of Reference on the IOR; Clemens Boersing, from Germany; and Sir Michael Hitze, from the UK. Two pending appointments will be filled in the coming months.

Msgr. Battista Ricca has been confirmed as IOR prelate, i.e. the link between the Cardinals Oversight Commission and the Board of Directors. The real news is that Msgr. Alfred Xuereb, general secretary of the Secretariat for the Economy, has been appointed secretary with no right to vote in the IOR board of directors. Formerly Benedict XVI’s second secretary and Pope Francis’ first secretary, Xuereb was appointed by Pope Francis pontifical delegate in the two pontifical commissions of reference, and later appointed Secretary of the Secretariat for the Economy. His entrance in the IOR Board probably means two things: that Pope Francis wants to keep an eye on these issues, and that the Secretariat for the Economy is now taking a leading role.

With the mission of the IOR reconfirmed, it is now time to re-shape the Institute. The IOR will keep itsservice function, the holding of accounts of Vatican employees and former employees, monsignors, prelates and cardinals and even ambassador to the Holy See and Vatican foundations. The management of the assets will be transferred to a new body, the Vatican Asset Management,yet to be established. The Vatican Asset Management should be also entrusted with the patrimonies of the  Congregation for the Evangelization of People and of the extraordinary section of the Administration for the Patrimony of the Apostolic See (APSA), the financial branch,which manages moveable assets derived from settlements linked to the Lateran Treaty.

The APSA extraordinary section will be responsible of maintaining relationships with all the main central banks, in order to – a July 9 Holy See Press Office bulletin reads – «keep on guaranteeing the Holy See’s liquidity and financial stability.»

The APSA was a public authority that acted as a central bank, and now it is going to be turned into a real central bank, with the functions of a treasury department for all the sovereign institutes which will open accounts with the APSA. The reform of the APSA statutes, which took place some months ago and which gave to consultors the function of a supervisory board, should be read in the light of this APSA turning into a treasury department.On that occasion, Vatican also established “due diligence” procedures that were technically unnecessary (considering that APSA provided very few regular banking services and was going to close this banking activity, as the Holy See delegation explained to MONEYVAL) unless APSA was going to become something more than what it was. 

The Secretariat for Economy strengthens its role

The APSA ordinary section, i.e. the management of real estate (in the end, trivial accounting) will be taken by the Secretariat for the Economy, which strengthens its position among the dicasteries of the Roman Curia and acts as a sort of branch of the ministry for finances, i.e. the Council for the Economy. This is how the check and balances of the reform work, explained Cardinal Pell, who is the strongman behind the managerial changes in the Curia.

The transfer of the APSA ordinary section to the Secretariat for the Economy will be managed by a Project Management Office headed by Danny Casey. A skilled manager, Casey was Pell’s right hand running the archdiocese of Sydney and successfully orchestrated the 2008 Sydney World Youth Day. Casey has already moved to Rome, together with his wife Annie, and  he is working on the management side of the issue.

A management side that is mostly built on COSEA suggestions. The first of the COSEA’s ten priorities was that of reforming the pension funds. Everybody is assuring that the retirement pensions for the current and next generation of Vatican employees are safe (Pell said so in a press conference, Zahra reiterated it), but there is a need for a new approach, just as «many western countries have had to face challenges» regarding their pensions system. A technical committee to draft a reform has been appointed. Msgr. Brian Ferme, prelate-secretary of the Council for the Economy, will lead the committee, composed by four lay experts: Bernhard Kotanko (Austria), Andrea Lesca (Italy), Antoine de Salins (France), Nino Savelli (Italy). The committee will meet with representatives of the Council for the Economy, theSecretariat of State, and of the Pensions Funds.

The committee for the reform of Vatican media

The committee appointed to propose a reform of Vatican media, on the other hand, will be composed by external members (senior experts) and Vatican members. The committee – as the same Cardinal Pell admitted – was born under the Secretariat for the Economy by chance, because  «the Council of Cardinals was pushing to do something» regarding Vatican media and so the Secretariat did, since it is the only recently established body that is already somewhat shaped and publishes an internal bulletin «so that all the employees are informed about developments.»

A rationalization of Vatican media has been discussed for more than 30 years. At the present time, the idea is that of integrating and consolidating everything, to streamline procedures and make everything quicker in adapting to the present times. New technologies – as the Pope’s App and the Holy Father’s twitter account – will be developed; digital channels are to be reinforced; a less complicatedcontrol system, freer from the Secretariat of State,is under study to meet the needs of the present times. A major revenue stream from the use of the Pope’s images and sound bites will be studied, perhaps even changing the statutes of the Vatican television, that – it is rumored – has already increased prices charged for the use of Papal footage.

The Committee is chaired by Lord Christopher Patten, Chancellor of Oxford University and until 2014 president of the BBC’s governing board, an authoritative and well known personality. Other members of the committee are Our Sunday Visitor’s president Greg Erlandson (USA); the executive director of the Catholic Media Council Daniela Frank (Germany); Father Eric Salobir, a Dominican, general promoter of the Order of Preachers for Social Communications and founder of the think tank OPTIC (Order of Preachers for Technology, Information and Communication); Leticia Soberon (Mexico), psychologist and founder of the website www.dontknow.net and a former official of the Pontifical Council for Social Communications; and George Yeo, former Foreign Affairs Minister of Singapore who already served in the Vatican as member of the COSEA, as Zahra and de Franssu. The inclusion of these COSEA members in the Vatican ranks showsthat their work has been appreciated by the Holy See.

The “Vatican side” of the committee is comprised by: Paul Tighe, Secretary of the Pontifical Council for Social Communications, who will also be the secretary and “engine” of the committee; the chief of the Office of Information of the Secretariat of State, Msgr. Carlo Maria Polvani, nephew of archbishop Carlo Maria Viganò, now Papal nuncio to Washington; Lucio Adrian Ruiz, of the Vatican Internet Service; Giacomo Ghisani of Vatican Radio; and Gian Maria Vian,the editor-in-chief of the Vatican news daily “L’Osservatore Romano”.

Two absences are noteworthy: that of Dario Edoardo Viganò, who was called to head the CTV in order to implementthe “economic turnabout” which will probably lead the CTV to produce more documentaries to be sold at commercial rates, as well as the exclusive for the Pope’s images; and that of Father Giuseppe Costa, director of the Vatican publishing house, one of the few Vatican communications bodies “in the black” that invests a huge effort to promote and spread the Pope’s words.

A glance to the future

Of course, it will take years before the reforms will be carried out. De Franssu has saidthat at least 24 months are needed to reshape the IOR.  The committee for communications will remain standing at least for 12 months (starting its work with a review of the McKinsey report, one of the many external consultants hired by the Vatican under Pope Francis).  Even drafting a pension funds reform will take not less than one year.

The model is that of an «specialized clerical-lay cooperation. » How this cooperation will be carried out at the IOR is still to be determined. The relations of the IOR with the “central bank,” still not active, are to be determined as well. And so it is to be determined how this reform will influence the redesign of the Vatican dicasteries.

There is ultimately a need torationalize expenses, diminish the number of employees (and this is the reason why the Vatican has frozen new hiring some months ago) and find a new balance in the elephantine Vatican structure. The path to reform has just started, and it bears no resemblance with the idealistic times when committees of theologians and Canon law experts adjusted the Curia’s structures and discussed the Holy See sovereignty and the inner theological meaning of every decision or move. Now, instead, it is a time for spending reviews.