Is Pope Francis beginning to panic about the Vatican’s finances?

If he is, it might already be too late

Pope Francis has called for renewed commitment to curial cost-cutting in a letter to the College of Cardinals, and signaled that Vatican departments may be called upon to share their resources. 

Caption: Pope Francis, pictured during a general audience on Oct. 15, 2014. © Mazur/catholicnews.org.uk.

The letter, dated September 16, and published by the Holy See press office on Friday, highlights the ongoing financial pressures facing the Vatican, and Francis’ own decade-long program of reform, while calling for “zero deficit” spending. 

Despite a years-long Vatican hiring freeze, senior salary cuts, and rent hikes for Roman cardinals, the pope this week asked the college to embrace “further efforts” to get spending under control in order “to guarantee the future of the Mission.”

Some Vatican-watchers have been warning for years that, despite the pope’s financial reforms, the curia is in danger of going bankrupt. The question now seems to be whether Francis is beginning to agree with them?

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When Pope Francis was elected by the conclave in 2013, it was widely understood that reform of the Vatican’s financial affairs was a key priority discussed among the cardinals, following years of scandal under Benedict XVI.

In his letter to the college this week, Francis recalled those discussions, saying that “the past years have shown that the demands for reform urged in the past by so many exponents in the College of Cardinals have been far-sighted.”

“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.”

No reasonable observer could accuse Francis of failing to initiate financial reforms during his 10-year pontificate — some of the biggest curial initiatives of his first years in office involved creating and strengthening Vatican financial departments and recruiting outside experts to run them.

Alongside those structural changes, the pope has also issued a raft of policy changes to how Vatican departments do business, and made attention grabbing efforts at cost-cutting around the curia.

But a clear-eyed assessment of Francis’ reforming agenda would also have to note that it has met with strong resistance. The pope himself admitted as much in his letter, noting “the difficulties and, at times, that temptation of immobility and rigidity in the face of change” his efforts have faced.

Critics of Francis’ efforts would also point out, perhaps with some justification, that he has at times seemed to take sides against his own most effective reformers — initially appearing to back the now disgraced Cardinal Angelo Becciu against Cardinal George Pell and Libero Milone, the first auditor general of the Vatican, when they attempted to enforce financial norms and procedure approved by the pope.

Following Becciu’s conviction, among others, for corruption, on balance Francis can probably take credit for overseeing more, and more effective, policing and prosecuting of curial financial corruption than any of his recent predecessors, even if legitimate criticisms remain about individual cases.

But stamping out financial corruption is only a partial solution to the curial budget crisis, as many Vatican-observers have long pointed out. And headline grabbing cost cutting measures notwithstanding, the overall picture of Vatican financial affairs has remained bleak for years.

Vatican interdepartmental memos obtained and previously reported by The Pillar showed that even at the height of Francis’ initial reforms, the annual Peter’s Pence collection was almost entirely being spent on Vatican bureaucracy because curial officials were “failing to do their jobs.” 

The memos also flagged “a dangerously, highly centralised investment process and opaque portfolio management operation that breed irregularities and represent significant exposure to fraud.”

Since those memos were written, the senior leadership of both major Vatican financial oversight bodies, the Secretariat for the Economy and the Office of the Auditor General, have turned over several times and have appeared to dial back the push for transparency and accountability. 

Indeed, while Francis used his letter this week to remind the College of Cardinals of the need to set an “example of a transparent and responsible management at the service of the Church” in working towards a “zero-deficit” Vatican, it isn’t clear how far away, exactly, that goal is.

The Secretariat for the Economy formerly published an annual mission budget presentation, but has not done so since 2022. According to the last published budget report, curial operations in 2022 were set to cost 796 million euros per year, with a forecast operating loss of 33.4 million after expected donations from sources including Peter’s Pence.

In October 2023, the secretariat’s current prefect, Maximino Caballero Ledo gave an indication of the scale of the Vatican’s financial “crisis” when he said that the Holy See had a structural budget deficit of “between 50 and 60 million euros a year,” despite years of cost-cutting measures.

The prefect put this relative size of this ongoing shortfall in stark perspective, noting that “If we were to cover this deficit only by cutting expenses, we would close 43 of the 53 entities that belong to the Roman Curia, and this is not possible.”

So where is the money going to come from?

Financial reports released by APSA earlier this year showed the Holy See’s institutional asset manager had recorded profits of 45.9 million euros last year. But while the results were widely hailed as a positive return, others pointed out that the same report noted a return of only 35 million across the Holy See’s international property portfolio of thousands of units.

Meanwhile, a separate report on the management of Peter’s Pence, the annual collection to support the work of the Holy Father, painted a catastrophic picture: 

While voluntary donations climbed in 2023, total revenue nearly halved, and the fund disposed of millions of euros in real estate assets in a fire sale to help cover the operations of the Roman curia the previous year.

The sale of stable assets by Peter’s Pence to fund daily Vatican running costs raises serious questions about the medium-term financial viability of Vatican operations.

In February, a senior official close to the Secretariat for the Economy told The Pillar that “Our Lord guaranteed the Church will never fail, but that guarantee didn’t come with an annuity.”

“There’s no magic money tree in the Vatican gardens,” he said. “There are still a lot of underperforming assets that need to be identified and maximized,” said the official, “but even that goes only so far. We are talking about very large operating losses every year bleeding away reserves.”

“Everyone likes to cheer the small victories, chipping away here and there at an unsustainable situation, but there’s no big picture thinking. Past a certain point, you’re just trimming the catering budget on the Titanic — sure you’re making savings, but what you need is a total change of course.”

Francis’ letter to the College of Cardinals appears to many like a clear sign the message is beginning to sink in, but what, if anything, can the pope do?

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“The economic resources at the service of the [Holy See’s] mission are limited and must be managed with rigor and seriousness,” Francis told the cardinals this week, and he has worked hard for the “implementation of ethical policies that improve the economic performance of existing assets.”

But while Francis has passed a considerable volume of new policies for curial departments, very little progress has been made in making the Church’s assets perform. 

Even away from disastrous (and sometimes immoral and even criminal) high-stakes investments, Vatican financial personnel have long complained that the single biggest issue they face is cultural opposition to maximizing profit — including at times from those closest to Pope Francis.

While the Vatican is most definitely not a business, the bulk of its income (about 65%) is derived commercially, from returns on assets and investments, including its sizable real estate portfolio, both in the city of Rome and worldwide.

But despite being a considerable landowner, as of 2022, only about a fifth of the Vatican’s property portfolio was actually available for generating revenue. The majority of its holdings are dedicated either directly to worship — including dozens of churches and basilicas, which have never been profit centers, even in good years for donations — or to other ecclesiastical works, such as hospitals and universities.

Sources close to the Secretariat for the Economy have previously told The Pillar that in the early years of Francis’ reforming efforts, under the leadership of Cardinal George Pell, the department drew up plans for generating new and more reliable long term income streams for the Holy See by identifying land and buildings otherwise not being used.

Plans included the large-scale development of sites for industrial, residential, or mixed use but would be contingent on securing external partnerships to develop sites and land while signing long-term leasehold agreements stretching out for decades. 

The same sources said that while the potential for new, significant, long term revenue generation was there, curial will outside the Secretariat for the Economy was not.

“The pushback from APSA, from the Secretariat of State, from people around Number 1 [Pope Francis] was total — it was absolute,” he recalled to The Pillar. “We were called alarmists, radicals, and so nothing got approved and everything went in a drawer.”

A medium-term Vatican liquidity crisis, they said, is now at least as likely as not. “When that happens,” one Secretariat for the Economy official said, “options are limited and very bad things can start happening.”

Given the tone of his letter this week, Pope Francis may now be inclined to take those previous proposals out of the drawer and bring them online. But even if he does so, it might be too late, since restructuring unprofitable real estate holdings into sustainable income streams through outside development and partnerships would take years to come online and likely entail significant upfront expenses.

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In the short term, Francis seems to have indicated the next phase of financial crisis management will involve breaking down historic ownership structures of assets and investments by specific Vatican departments.

“Each of the Institutions of the Holy See forms a single body with all the others: therefore, authentic collaboration and cooperation towards the one goal, the good of the Church, represents an essential requirement of our service,” he wrote to the cardinals. “The surplus-listed bodies should help to cover the general deficit.”

That suggestion, that financially independent and historically wealthy dicasteries should be prepared to foot the bill for other departments will likely cause considerable consternation in some corners of the Vatican, and perhaps outright panic in others.

In some cases, like the Dicastery for the Evangelization, centuries of bequests for specific intentions have led to considerable independence — financial and therefore operational — for some curial departments. 

Resistance to sharing their financial information, as much as their money, will likely be fierce in some quarters, fueled in at least some departments by fears of what a renewed round of budgetary and accounting scrutiny might discover about lax internal financial controls.

Francis’ letter to the college this week suggests that the budget blackhole which has been slowly consuming the Vatican for years has finally grown too big for him to ignore. The question now is: can he convince the curia of the urgency? 

Even if he can, it might already be too late.

As one official at the Secretariat for the Economy told The Pillar in February: “People like to imagine the Vatican is ‘too big to fail.’ Especially people in the Vatican.” 

It isn’t, he warned.