ROME – Sometimes when two apparently unrelated stories happen at the same time, the intersection offers a reminder that neither development can truly be understood without the other. Such has been the case in recent days with regard to the fairly bleak situation facing Vatican finances.
On Tuesday, the Vatican’s Council for the Economy held an online meeting to discuss not only the 2020 deficit, which is expected to be more than $60 million, in part due to coronavirus-related shortfalls but also the looming crisis in unfunded pension obligations. That conversation came just a few days after a new partnership was announced called the “Council for Inclusive Capitalism with the Vatican,” featuring business leaders joining forces with Pope Francis for reform of the global economic order.
In effect, the latter story helps explain why the former doesn’t keep Vatican potentates awake at night.
The Council for the Economy was created in 2014 as part of Pope Francis’s early financial reforms. It’s intended to oversee financial policy in the Vatican, and it’s striking because the group is composed of both prelates and laity with the same voting rights.
During its most recent session, members of the council received a briefing about the mounting red ink facing the Vatican this year. The coronavirus pandemic has hit the Vatican hard, largely because much of its annual income is based on the flow of pilgrims and tourists that usually means robust ticket sales at the Vatican museums, but which has been largely turned off in 2020 due to travel restrictions and shutdowns.
In addition, the Vatican also depends on contributions from dioceses and other Catholic organizations around the world, and that cash flow too has been reduced because dioceses themselves are facing shortfalls since collections from Sunday Mass are significantly down in places where liturgies have either been suspended or attendance limited due to Covid-related precautions.
In addition, it’s not yet known how much the annual Peter’s Pence collection brought in this year, but it may well be down not only because of general economic contractions around the world but because of a financial scandal involving the purchase of property in London by the Vatican’s Secretariat of State using money from the fund. “Peter’s Pence” is an annual collection in which Catholics are asked to contribute to support papal activities.
All this is on top of a looming financial crisis in the form of unfunded pension liabilities. The Vatican has a pension fund, but most observers believe it’s under-funded relative to a rapidly aging workforce and ballooning deficits. The fact that the Vatican is going to have to allocate a growing share of shrinking resources to pay for those pensions in coming decades is a large part of why Australian Cardinal George Pell, formerly the Vatican’s chief financial officer, recently said the Vatican is “slowly going broke.”
In any other institution, such a sea of red ink and looming disaster might leave managers in a cold sweat and on the verge of panic. Yet no such climate of alarm is discernible in the Vatican, where one of the pope’s top financial officials, Bishop Nunzio Galantino of the Administration of the Patrimony of the Apostolic See, effectively the Vatican’s central bank, continues to give reassuring interviews along the lines of “nothing to see here” and “everything’s fine.”
How to explain the apparent nonchalance?
Consider the Council for Inclusive Capitalism with the Vatican, a partnership between some of the world’s largest investment and business leaders and the Vatican announced Dec. 8. The organization’s aim is to harness the resources of the private sector to support aims such as ending poverty, protecting the environment and promoting equal opportunity. The group has placed itself under the moral guidance of Pope Francis and Cardinal Peter Turkson of Ghana, head of the Vatican’s Dicastery for Promoting Integral Human Development.
Its membership is a virtual Who’s Who of the corporate world: CEOs from Bank of America, British Petroleum, Estée Lauder, Mastercard and Visa, Johnson and Johnson, Allianz, Dupont, TIAA, Merck and Co., Ernst and Young, Saudi Aramco, and on and on. Honestly, it’s almost easier to list Fortune 500 companies that aren’t somehow represented.
The group is the brainchild of Lynn Forester de Rothschild, a successful telecommunications executive who married into the legendary Rothschild family in 2000 and who’s long been involved in broadly progressive political causes. Pope Francis met the group during a Vatican audience in November 2019.
Collectively, the Council for Inclusive Capitalism with the Vatican brings together corporate entities with $10.5 trillion in assets under control and $2.1 trillion in market capitalization, with a workforce of 200 million present in 163 countries.
Such staggering resources, perhaps, help explain why mounting deficits and underfunded pensions don’t keep Vatican officials awake at night.
It’s entirely possible that a combination of greater fiscal discipline and a gradual exit from the coronavirus crisis as vaccines make their way around the world will turn things around in the Vatican. But let’s assume the worst happens, that costs continue to soar out of control while revenues continue to shrink, and Pell’s prediction comes true that the Vatican finds itself facing insolvency.
Does anyone seriously believe that the pope’s new corporate BFFs, with $10.5 trillion in assets at their disposal, couldn’t help cover a $60 million deficit in a pinch? In all likelihood, all it would take is a couple phone calls and a photo op.
There’s no suggestion the new council was created for that purpose. On the contrary, it wasn’t a Vatican initiative at all. Yet anyone with eyes can see the potential should it be needed, so, in effect, the group represents a sort of “break glass in case of emergency” failsafe.
And that, in turn, is why Vatican financial “crises” often are experienced as less menacing than similar situations would be in other environments. Deep-pocketed friends don’t show up on balance sheets, but everyone knows they’re around.
Follow John Allen on Twitter at @JohnLAllenJr.
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