ROME – Facing both a looming economic crisis and reminders that the anti-financial scandal measures adopted to date haven’t been fully effective, Pope Francis and his Vatican team this week have moved to try to defuse the bomb before it goes off, closing several Swiss holding companies responsible for portions of its assets and reallocating internal control over financial data collection.
Even together, the two moves hardly represent a comprehensive fix. Yet they do suggest that dubious transactions, which have generated scandal and so far cost five employees their jobs, coupled with several financial shortfalls caused by the coronavirus pandemic, certainly have gotten the pope’s attention.
On Tuesday, Corriere della Sera, Italy’s newspaper of record, reported that Francis has shut down nine holding companies based in the Swiss cities of Lausanne, Geneva and Fribourg, all of which were created to manage portions of the Vatican’s investment portfolio and its land and real estate holdings after the 1929 Lateran Pacts and payments by Mussolini’s Italy to offset the loss of the Papal States in the 19th century.
The deal netted the Vatican about $100 million in 1929, the equivalent of $1.5 billion today.
On Wednesday, just 24 hours later, the Vatican also announced that Pope Francis has transferred control of the Centro Elaborazione Dati (“Center for the Elaboration of Data,” known as CED) from the Administration of the Patrimony for the Apostolic See (APSA) to the Secretariat for the Economy (known by its Italian acronym “SPE”.)
The center is the office responsible for monitoring cash flows and assessing their impact on the Vatican’s financial situation – which means that if anyone on earth knows how much money the Vatican actually has at any given moment, or at least how much cash it has on hand, it’s these folks.
The backdrop to these moves can be found in two recent developments.
First, before the pandemic broke out the Vatican was wrestling with a new financial scandal, involving a controversial $225 million land deal in London orchestrated by the Secretariat of State. The affair led to the suspension, and eventual firings, of five employees, as well as the abrupt departures of both the Vatican’s top anti-money laundering guru and the head of its internal police force, the gendarmes.
Second, an internal report recently prepared for Pope Francis and his department heads by the Secretariat for the Economy, first reported by the Roman newspaper Il Messaggero, projected that the Vatican’s annual deficit this year could balloon as much as 175 percent, reaching $158 million. Further, the report warned of long-term financial weaknesses exacerbated by the coronavirus shortfalls, including unfunded pension obligations for a workforce that’s too large to sustain.
The two moves revealed this week appear to respond to both developments.
In terms of the Swiss holding companies, the SPE report recommended consolidating all the Vatican’s investment activities in a single center, both to provide greater transparency in tracking transactions and also to foster greater return on investment, on the theory that one large fund can negotiate better deals than several smaller ones.
The closures in Switzerland move in that direction, since all the Vatican’s investments there now will be managed by a single agency: Profima Société Immobilière et de Participations in Geneva, set up in 1926 by Bernardino Nogara, an Italian banker and devout Catholic, at the behest of Pope Pius XI in preparation for the Lateran Pacts. (Nogara would go on to be the first director of APSA.)
The value of the Swiss investments is estimated to be around $50 million, and presumably the lone holding company left standing will remain under the control of APSA, since the internal report recommended centralizing investment portfolios of all Vatican entities under its aegis.
Similarly, the transfer of CED from APSA to SPE would seem to be at least partly about scandal avoidance, ensuring a sharper distinction between the management of assets and oversight over how those assets are managed.
As a footnote, this is the first time something related to the financial operation has been taken away from APSA and given to SPE, rather than vice-versa, since Australian Cardinal George Pell’s Vatican star began to dim even before he was forced to return home to face child sexual abuse charges, for which he was eventually vindicated by the Australian High Court. As Francis began to have doubts in 2015 and 2016 that Pell’s style might not be what the job required, pieces of SPE were sliced off and returned to APSA, which was taken as a sign that the original vision of reform was dead.
Presumably, this move isn’t so much a loss of faith in APSA, which, since June 2018, has been led by one of the pope’s closest allies, Italian Bishop Nunzio Galantino, so much as a gesture of confidence in Father Juan Antonio Guerrero, a fellow Jesuit tapped by Francis to take over at SPE last November.
One way to read the week’s developments, therefore, is this: Pope Francis now has people in charge of the Vatican’s financial operations whom he trusts, and he’s got at least the working outlines of a vision for reform involving greater consolidation, simplified cash flows and systems for monitoring and evaluation.
It’s hardly a repudiation of the aborted Pell reform, since, among other things, a centralized investment fund was actually his idea. But, it’s still a different approach led by different people. Time will tell where the pope’s “Reform 2.0” goes after this week’s opening salvos.
Follow John Allen on Twitter at @JohnLAllenJr.