27-02-2025
Pope Francis was in Vatican finance struggle before hospitalization
Before he was hospitalized for double pneumonia, Pope Francis was battling firm resistance from some of his own cardinals about how to plug a widening gap in the Vatican's finances.
Three days before his hospitalization, Francis ordered the creation of a new high-level commission to encourage donations to the headquarters of the 1.4-billion-member Catholic Church.
The new "Commission on Donations for the Holy See", announced by the Vatican on Wednesday as Francis was spending his 13th day in hospital, was formed after the pope faced push back against his proposals for Vatican budget cuts from within the Roman Curia.
In a closed-door meeting late last year, Vatican department chiefs, including senior cardinals, argued against cuts and against the Argentine pope's desire to seek outside funding to fix the deficit, two officials told Reuters.
The officials asked not to be named due to the sensitive nature of the information.
Francis has been seeking to patch up the budget for several years. He has cut cardinals' salaries three times since 2021 and demanded a "zero deficit" agenda in September.
But his efforts appear to have had little impact.
Although the Vatican hasn't published a full budget report since 2022, the last set of accounts, approved in mid-2024, included an 83-million-euro ($87 million) shortfall, the two sources said.
Reuters was not able to verify the deficit figure independently.
While the Vatican has operated with a deficit for years by rebalancing accounts and drawing on the dividends from its investment income, the gap has grown significantly in recent years. In 2022, the gap reported by the Vatican was 33 million euros.
Two cardinals who oversee the Vatican's budget declined Reuters' requests for interviews and did not provide current budget information. The Vatican did not respond to a request for comment.
Limited income streams
The pope appointed a new administrator for the Vatican's pension fund in November, and warned its operating structure may need to change, without providing further details. The fund has not made its accounts public.
Many public pension funds have underestimated how long retired employees will live, throwing off their budget calculations. In 1960, Italy's average life expectancy was 69 against 83 in 2022. It is not clear if the Vatican has made any adjustment to take this into account.
"If you get the life expectancy assumptions wrong, that could be a huge problem," said Gregory Kearney, a researcher at Stanford University who has studied failing state pension funds in the U.S.
The Vatican, a microstate within Rome, has limited fiscal options. It does not issue debt, sell bonds, or levy taxes. A 2010 monetary agreement with the EU limits the Vatican to only issuing a fixed amount of euro coins each year, initially set at a sum of 2.3 million euros.
The global Catholic headquarters instead has three main income streams. It takes donations through the pope's official fund. It has an investment portfolio, which includes stock investments and more than 5,000 properties, the vast majority in Italy. And it makes money from admissions to the Vatican Museums.
The museums suffered a major decrease in income during the Covid pandemic from 2020 to 2022, due to extended lockdowns in Italy, but visitors have flooded back since 2023.
The Vatican reported a profit of 45.9 million euros on its investments in 2024. It did not say whether it was selling any assets, but said 35 million euro of the profit came from better management of rental properties.
Donations to the Vatican have been relatively stable, averaging around 45 million euros over the past decade, with spikes of 74 million euros in 2018 and 66 million euros in 2019.
However, Ed Soule, a business professor at Jesuit-run Georgetown University in Washington, worried that wealthy Catholic donors could start withholding donations if they felt they were being used for underfunded pension liabilities rather than charitable work.
"Some donors would look at this and say I'm not really interested in using my money to fund your unfunded pension," he said. "It's just not the sort of thing that gets people excited."
