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It may be years before Vatican finances are truly reformed

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Once a year Catholics are asked to contribute to a collection known as Peter’s Pence. They do so on the understanding that their donations will go directly to the Holy Father, enabling him to support charitable works around the world. The money might, for example, help subsistence farmers in Ethiopia, Catholics in war-torn Ukraine or hurricane victims in Haiti. Few would imagine that their hard-earned money might be spent on converting a property into luxury apartments in one of London’s most exclusive areas. But that is what is alleged to have happened, according to leaked documents published by L’Espresso last Sunday.

The Italian news weekly said it had obtained two confidential documents which reveal that the powerful Vatican Secretariat of State controls a fund of around $725 million (£558 million, €649 million) derived from Peter’s Pence, which it keeps off the books. L’Espresso quoted Vatican investigators as saying that some $560 million of this money has been subject to “irregularities”.

The magazine focused on one peculiar episode in which the Secretariat of State reportedly asked an Italian financier to invest €200 million of its extra-budgetary funds in an oil company in Angola. But this plan was abandoned and the money spent instead on buying a 45 per cent stake in a London property. It is not clear how those involved thought that turning a former Harrod’s warehouse into opulent flats would advance Pope Francis’s vision of “a poor Church for the poor”. But they pressed ahead and, according to L’Espresso, were hit by a downturn in real estate prices following the Brexit vote. Church officials then sought to extricate themselves from the deal, triggering a complicated internal battle within the Vatican.

At the risk of oversimplification, three Vatican bodies seem to be involved in this clash: the Secretariat of State; the so-called Vatican bank (properly known as the Institute for the Works of Religion); and the Financial Information Authority, a supervisory body founded by Benedict XVI in 2010.

L’Espresso reported that the Vatican bank complained about the London deal, prompting an investigation. The magazine quoted a source claiming that the bank hoped to seize control of Peter’s Pence fund by undermining the Secretariat of State.

The complaint, formally lodged in July, led to the suspension of five Vatican officials this month, including Tommaso Di Ruzza, director of the Financial Information Authority. That seems curious, given that, according to the Italian weekly, the authority had flagged the London deal as suspicious and tried to block it. The magazine speculated that Di Ruzza’s suspension might be an attempt to prevent the authority from probing too deeply into the Secretariat of State’s financial affairs.

What are the laity, who year after year donate generously to Peter’s Pence, to make of all this? It will, of course, make them worry that money earmarked for the poor may not reach the needy. The Vatican must reassure them that this is not the case.

The controversy is likely to be a source of sadness for Pope Francis, who was elected in 2013 with a mandate to reform Vatican finances. He pursued this goal energetically, establishing a Secretariat for the Economy, led by Cardinal George Pell, with authority over the financial activities of the Holy See. The new secretariat made considerable progress before it lost an internal power struggle with the Secretariat of State; Cardinal Pell later felt compelled to return to Australia to answer historic child abuse allegations.

Today, it is abundantly clear that financial reform has stalled. Not only that: there are alarming indications that the Vatican is on the verge of a financial crisis.

According to Gianluigi Nuzzi, an Italian investigative journalist, donations to Peter’s Pence have fallen significantly in recent years. Nuzzi, who is publishing a book which he says is based on 3,000 leaked documents, claims that the Vatican risks defaulting by 2023 (curial officials strenuously deny this).

Lay Catholics may well wonder if Vatican finances are irreformable. We wish that we could offer them some immediate reassurance. But the sad truth that it may be years before there is another systemic attempt to overhaul the Vatican’s scandalously opaque financial system.