‘The market giveth and the market taketh away’
He also has to find new revenue to balance the Vatican’s budget.
After making a profit for eight years, the Holy See, the central administration for the Church, ran deficits in the three years through 2003, the Vatican’s financial statements show. The separately run budget for Vatican City, the independent papal state in Rome, was also in the red in 2003, the latest year for which figures are available.
The Papacy relies on earnings from roughly $1 billion in stocks, bonds and real estate to top up donations from Catholics around the world. While the Holy See benefited in the 1990s from booming stock markets and a strong dollar, losses on currencies plunged it to a €9.6 million loss on revenue of €204m in 2003.
“Vatican administrators, like many people, got accustomed to balancing the budget with great market gains,” says Joseph Harris, 64, a Seattle accountant who writes a yearly analysis of the Vatican’s finances. “Well, the market giveth and the market taketh away.”
Catholic churches around the world donate about €80m a year to the Vatican. Individual Catholics gave an additional €49m in 2003 to be used by the Vatican for charities, according to the annual report.
The new Pope won’t able to use the Church’s priceless art treasures and four Roman basilicas to boost the bottom line. The Vatican has a policy of never selling its art.
The Italian Government would block the export of any of the Vatican Museum’s collection, which includes 460 paintings by masters such as Giotto, Caravaggio and Raphael, said Monsignor Claudio Celli, 63, who is in charge of managing the Holy See’s assets as secretary of the Administration of the Patrimony of the Apostolic See.
“That’s our situation: so little liquidity and so many great art treasures,” Msr Celli said in an October 2003 interview.
“But how do you value Michelangelo’s Pieta?” he asked, referring to the Michelangelo statue of a dead Christ draped over Mary’s lap that sits in a side entrance to St Peter’s Basilica, Europe’s largest church. All of the Vatican’s art and buildings are valued at €1 on its books because it would be impossible to assign them a market value, he said.
When he became Pope in 1978, John Paul II inherited a Church that didn’t publish any financial details and was losing money.
He introduced financial reporting and found new sources of revenue. As financial markets fell, the losses returned.
The Holy See and Vatican City are scheduled to announce their 2004 results in July.
Msr Celli in 2003 said that he had recently shifted most of the Holy See’s portfolio away from stocks and into short-term bonds.
The Holy See includes the curia, whose 20 councils and congregations set Church doctrine and policy; the Pope’s 118-embassy diplomatic corps, the Vatican’s radio station and Rome real estate used to house clergy.
Its 2003 results included a €22.4m profit from renting buildings near the Vatican, and an €11.6m loss on financial assets, according to the annual financial statement.
The Holy See’s 2003 revenue fell 6% to €203.7m as costs declined 7.3% to €213.2m.
Vatican City had 2003 revenue of €145.9m, up 5%, mostly from entrance fees paid by three million visitors to the Vatican Museums and the tax-free stores it operates for employees and diplomats. The €8.8m deficit came after the city paid €10.5m to help the Holy See cover losses at Vatican Radio for a second year in a row.
The stores within the Vatican walls include a pharmacy that can import medicines not yet approved in Italy, a supermarket and a store housed in a restored old train station that offers Giorgio Armani suits, Chanel perfumes and Cartier watches at as much as 50% cheaper than they cost elsewhere in Rome.
The world’s smallest state, Vatican City occupies half a square kilometre on the right bank of the Tiber River in central Rome. It mints its own euro coins and issues its own postage stamps, also denominated in euro. It had 1,534 workers in 2003. Tourists can only visit St Peter’s Square, the basilica and the museum.
Behind the basilica are 19th-century palaces and office buildings spread around landscaped gardens.
One of those buildings houses the Istituto per le Opere di Religione, which is also known as the Vatican Bank and is the third pillar of the Vatican’s finances. It doesn’t release financial data. In 1994, Cardinal Rosalio Jose Castillo, who then oversaw the bank, said it had deposits of $4bn, according to the 1996 book Inside the Vatican by Thomas Reese, a US Jesuit.
Most of the Vatican’s 4,000 employees have deposits there. So do many religious organisations, which use the bank to transfer money around the world.
The 2,864 Catholic diocese and 412,886 parishes worldwide - even Rome’s - are financially independent from the Vatican and many have far more money.
That independence kept the Vatican financially untouched by sex-abuse scandals in the US, even though many dioceses filed for bankruptcy protection after paying out millions of dollars to victims.
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