The new Pope’s first crisis

Why? Because despite 12 years of financial reform under Pope Francis’ watch, years of asset fire-sales, hiring freezes, cuts to senior salaries and even a headline-grabbing move to force cardinals to pay 21st-century rents for their Roman digs, the curia is in danger of bankruptcy.

Today, the Holy See has not only tripled its budget deficit but faces the stark reality that its pension fund is 1.2 billion euro in the red with liabilities it just can’t cover. And it has not produced a formal budget document to prove Francis’ desire for “transparent and responsible management at the service of the Church” since 2022. 

According to the last published budget report – now more than three years old – curial operations were set to cost 796 million euro a year and, after donations including Peter’s Pence, it forecast an operating loss of 33.4 million. 

Of course, the Vatican is not a ‘business’ although a good two-thirds of its income comes from commercial returns from investments, assets and its global real estate portfolio. At the same time, only an estimated one-fifth of its property can generate income as so much of its holdings are churches and basilicas or hospitals and educational institutions that have never made profits.

And while every year, nearly seven million people visit the Vatican and pay entry fees to see the Catholic Church’s vast artistic and architectural patrimony in Rome, ticket sales are simply not enough to pay for insurance and upkeep, let alone the wages of a civil service, a security force and global network of embassies.

When Pope Francis was elected by the conclave in March 2013, it was made very clear just hours after the vote by cardinal Timothy Dolan, bishop of New York, that reform of the Vatican’s sclerotic financial affairs was a key priority for electing cardinals. 

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In fact, Dolan broke with protocol, pre-empting a formal Vatican press conference afterwards to tell the world, “I will sleep well tonight… the Church is in good hands.”

Francis himself hinted back to the mandate he was given on his election in a letter to the College of Cardinals as late as last year, when he wrote that demands for reform urged in the past by so many “were “far-sighted”. 

But he was also forced to acknowledge that his program of change has not been enough: “A further effort is now necessary on the part of all, so that a ‘zero deficit’ [budget] is not only a theoretical goal, but a truly achievable one,” the pope wrote. “We must be aware that today we are facing strategic decisions to be taken with great responsibility, because we are called to guarantee the future of the Mission.”

Looking back, even Francis’ greatest critics would be hard pressed to accuse him of not trying to drag the Vatican’s finances into the modern world and into compliance with global anti-money laundering regulations, strict auditing procedures and properly monitored accounting systems – overseen by lay, external experts.

One of his first acts was to create the new secretariat for the economy to take over the running of the Vatican’s finances and appointed the outspoken Australian cardinal George Pell to head it, flanked by the Vatican’s first auditor general, former Deloitte chief, Libero Milone. A former chief executive of Invesco Europe, Jean-Baptiste de Franssu, was head-hunted to run the Vatican Bank. Very quickly, thousands of accounts were checked, analysed and closed in a bid to purge the bank of clients who might be using the Vatican to evade taxes or worse, launder money gained illicitly.

History would later show that as Pell, in tandem with the auditor, Milone, homed in on problematic and shadowy investments, including the now notorious £400 million Sloane Avenue property scandal, Pope Francis initially, wrongly backed some of those working against change like the now disgraced Cardinal, Angelo Becciu. 

Ultimately however, the two-year Vatican trial of the century into financial crimes would reveal that the problem lay not with the Pope’s will but in the colossal, internal resistance to reform from those George Pell had quickly described witheringly as the “old guard”.

The pushback at the time, said a source working at the coalface, was absolute and “everything was put in a drawer, nothing got approved.”

Under Pell’s leadership, plans had also been drawn up to try to build more reliable and long-term revenue streams for the Holy See. A ledger of land and buildings not properly used was created and plans to re-develop sites for industrial, residential, or mixed use put on the drawing board. Discussion about securing external partnerships to develop the sites were underway which would have seen the signing of long-term leasehold agreements creating income which could stretch out for decades. 

In the end however, Pell and his team were unable to harness curial will outside their department. In 2017, the Australian cardinal returned to his homeland to face historic sex charges (later quashed) and Milone and his deputy were sacked in mysterious circumstances. Eight years later, their wrongful dismissal case and demand for damages has yet to be resolved by the Holy See.

Last year, after the sentencing of nine Vatican officials, including Cardinal Angelo Becciu, for financial crimes, Francis himself acknowledged, if somewhat diplomatically, the internal war waged against his financial reforms as “the difficulties and, at times, [the] temptation of immobility and rigidity in the face of change”.

Libero Milone’s view, understandably, is more pointed: “Pope Francis had the will and wanted the reforms. But even now there appears to be no strategy, no will to truly reform the way the Vatican manages its patrimony and its finances,” he told me. “It is not enough to make small, piecemeal decisions – there is a need for a blueprint, a master plan to right the ship and bring it into the 21^st century and most importantly, the will to implement it.”