Pope Francis: Financial woes part of legacy

As of this writing, Pope Francis is still in hospital. He’s had some ups and downs, and his prognosis is reserved, but the official reports have been saying he is at work as and when he can, and last week the Vatican even produced the receipts.

While Pope Francis was in the hospital, the Vatican published the document – a “chirograph” for folks following from home, a term originally referring to a handwritten legal document – with which the Pope established the Commission for Donations for the Holy See,  which is pretty much exactly what the name suggests it would be.

Composed of a president and four members, the commission has its mandate within the Administration of the Patrimony of the Apostolic See and the Governorate of the Vatican City State, and is tasked with “encouraging donations with specific campaigns among the faithful, Episcopal Conferences and other potential benefactors, underlining their importance for the Mission and the charitable works of the Apostolic See,  as well as finding funding from willing donors for specific projects presented by the Institutions of the Roman Curia and the Governorate of the Vatican City State, without prejudice to the autonomy and specific competences of each Entity, according to the current legislation.”

The establishment of the commission is further evidence, were any needed, of a serious structural crisis in the Holy See’s finances.

In recent times, the Pope’s interventions have multiplied, even asking the cardinals to personally find the necessary donations, establishing that there would no longer be apartments at controlled prices even for the heads of departments, and contracting out many of the Holy See’s financial skills to external consulting firms. But the state of crisis also tells another story. Pope Francis’s promotion of the Church as a “field hospital” cannot work. On the contrary, the Church’s response to emergencies with emergencies leaves it increasingly short of breath.

Metaphorically speaking, Pope Francis had been elected – he said it himself, on several occasions – with the mandate to reform the Curia. One of the areas of reform was precisely the financial sector, the first in which he intervened. Pope Francis first established two commissions (the COSEA on administration and the CRIOR on the IOR). He then started a major reform of the Vatican economy, which was placed in the hands of Cardinal George Pell, who was appointed prefect of the Secretariat for the Economy at the time.

This reform, however, has thrown the entire Vatican financial system into crisis, which was based on some specific balances. The Holy See is a peculiar state without either a real market of its own or any balance of trade that would allow it to strengthen the economy..

The only liquid income comes from the Vatican Museums and the rents of the properties owned by the Administration of the Patrimony of the Apostolic See and the Dicastery for Evangelization. Other income comes from financial investments, concentrated since the 1930s mainly in real estate, through four foundations linked to APSA and established in France, Switzerland, and England. The Secretariat of State had its administration called upon to invest and create assets, with the autonomy given to government bodies. The IOR, a small institution with 4.4 billion euros in assets and little else, had financial investments that created a sure profit. Each dicastery received some specific donations.

The system worked, mainly because the budgets worked on a principle of mutual aid. In 2015, the budgets of the Curia and the Governorate were published together for the last time. The Governorate’s budget, which counted the income from the Vatican museums, was used to cover the budget deficit of the Roman Curia, which has no income and is almost entirely allocated to employee salaries.

Not only.

Peter’s Pence, born in the Middle Ages as a support for the Apostolic See and since the 19th century the way for the faithful throughout the world to support the activity of the Pope, continues to suffer the consequences of mismanagement and shady marketing.

Supporting the activity of the Pope means, in effect, maintaining the machine of the Curia. For decades, however, Peter’s Pence directly and indirectly solicited donations the world over, by talking up the opportunity if gave the faithful to contribute to the Pope’s own charitable work.

It is, in fact, through the government of the Church that the Pope can distribute aid and carry out his mission. The Holy See and the Vatican City State are not the ends of the government of the Pope. Still, it is one thing for a struggling family man to donate on the understanding the Pope would pass the donation to the neediest in the world, quite another for the Pope to use the donations to plug holes in the operating budget or even invest the donations and use the proceeds with discretion.

The reality is a bit more complicated. They are the Pope’s means, guaranteeing the Church a certain freedom. Financial autonomy has allowed the Church not to be dependent on external aid but to be able to meet its own needs through its activities.

As said, the system provided for mutual aid and “adjustment” of budgets. The IOR, for example, gave a voluntary contribution each year to the Curia to balance the budgets. Donations were collected, of course, and were welcomed. But the Holy See was built to live on its own. Of course, there were difficulties to be resolved. As always happens in organizations led by men, there was corruption and naivety.

But it was also necessary to consider that the media campaign against the Holy See’s finances—unleashed in particular in the last years of Benedict XVI’s pontificate—was due precisely to the fact that the Holy See had, step by step, created an autonomous, functional, and internationally recognized financial system. In reality, Benedict XVI initiated reform processes that had also uncoupled the Holy See from the privileged bilateral relationship with Italy, projecting it instead among the virtuous nations of Europe.

It would be enough to read the reports of the Moneyval Committee of the Council of Europe of those years to realize the work done by the Holy See and how remarkably avant-garde it was.

Why, then, was this construction work attacked?

First of all, it seems that public opinion’s influence was fundamental and then fell on Pope Francis’s somewhat propagandist desire to have a Church “poor for the poor.” This slogan works only when one does not really know how a complex machine like the Church and its charity work. The Church is poor because it keeps nothing for itself. But it cannot be poor in structure, organization, or professionalism.

As a result of this influence, commissions were created with members external to the Holy See, and consultancy was gathered from entities that treated the Holy See not as a State but as a financial institution. The checks and balances of financial institutions were thus applied, but all the balance sheets were separated for an accounting cleanup that resulted in financial suffering.

The Holy See divested from certain investments that raised some ethical issues. The divestment and reinvestment, however, also involved ethical investments with good income that were replaced by others that did not guarantee the same income. Furthermore, divestment causes financial losses because you pay penalties for divesting.

Thus, we find ourselves faced with a patrimony that is losing value and difficult to manage, while financial reforms have gone forward and backward frequently in these ten years. Suffice it to say that APSA was stripped of its powers and then given them back, which was already at the beginning of the reform (with the 2016 motu proprio I beni temporali) An auditing contract also had to be changed because it gave access to the State accounts that no State would ever have accepted.

But all this happened because the Pope allowed two worlds to clash, did not give a precise government direction, and then chose the most dictated strategy by public opinion. That is, that of financial speculation, of external professionals, of cutting institutional branches.

This is where the great season of Vatican trials comes from, which demonstrates—among other things—a Pope forcefully intervening in micromanagement, even indicating to the Secretariat of State, for example, how to close the deal on the luxury building in central London, only to then accept that all the protagonists of that affair should go on trial, even those who had acted according to his directives.

However, the destruction of the system has not led to a more transparent Holy See, despite the balance sheets that are now published every year by IOR, APSA, and the Holy See. In which the ups and downs of management are certified – the IOR, for example, has never repeated the record profit of 86.6 million that it had in 2012, the last year before the management of the current pontificate.

The trial on the management of the Secretariat of State’s funds arises precisely from the rejection of the old system of mutual aid between ministries and financial institutions. The complaint comes from the IOR, which first accepts and then suddenly refuses to advance a loan to the Secretariat of State that, among other things, would have been repaid with interest.

This entire system has been dismantled by mismanagement and a financial idea that does not consider the peculiarities of the Vatican State. Thus, we have returned to the Middle Ages: the Holy See must maintain itself with external donations, and even an ad hoc commission is needed. However, Peter’s Pence already had that task – and gave part of the proceeds to people experiencing poverty anyway.

Not only that. The budget of the Vatican Pension Fund, the only one in the black because it is made up of money paid by employees (which remains employee money), has never been published, and this opens the risk that the Fund could also be used to fill budget holes. And again: the historic real estate assets of the Holy See are being disposed of, many nunciatures are being sold or for sale, the diplomatic representations of the Holy See are losing their homes and are forced, instead, to go to solutions that, not being owned, can only be temporary. Thus, the work of Pius XI has also been erased, who used the first money from the Conciliation precisely to restructure and give new strength to the papal representations.

In fact, a piece of history has been eroded, as has the independence of the Holy See.

It remains a sovereign state with serious structural deficiencies. It depends on donations from the faithful, returning to a situation similar to that with the end of the Papal State in the 19th century.

Rebuilding the system will be difficult, as it will be difficult to see the responsibilities of those who accepted and promoted this change of mentality.

In the meantime, the patrimony will be sold off, piece-by-piece, to cover the budget holes. The income that came from each piece will be lost. leading to larger and larger exposure for the Holy See.