The Italian daily, Il Mesaggero, published a piece earlier this week by their Vaticanologist, Franca Giansoldati, detailing a financial outlook that is very grim, indeed.

Internal Vatican documents obtained by Il Messaggero – a paper Pope Francis reads regularly – show that curial heads are contemplating drops in revenue between 30% and 80% in 2020, and a resulting deficit between 28% and 175%, depending on how successful cost-controlling measures – some of which are already in place – prove to be.

The documents, which came from the Secretariat for the Economy, detail best-case, middle-case, and worst-case scenarios.

The best case is one in which the dip in revenues is modest – between a third and a half of ordinary income – and the cost-cutting measures largely effective: here, the Vatican foresees a 28% deficit.

If revenues drop 50% or 60%, and the belt-tightening efforts less effective, the deficit could reach 83%.

If the economic disruption leads to protracted malaise, revenues will suffer accordingly – the Vatican foresees a possible drop of 80% – and if costs are not contained, the deficit could reach 175%.

The Vatican’s recently-appointed economy chief, Fr Juan Antonio Guerrero Alves SJ, was in the  Vatican News pages on Wednesday to downplay the severity of the crunch and urge calm. “We have made some projections, some estimates,” he said. “The most optimistic calculate a decrease in revenue of around 25%; the most pessimistic, around 45%.”

“Today,” Fr Guerrero continued, “we are unable to say whether there will be a decrease in donations to the Peter’s Pence collection, or a decrease in contributions from the Dioceses.”

Fr Guerrero spoke directly to the question whether the Vatican faces default: “No,” he responded, “I don’t think so. The Vatican is not in danger of default.” He went on to say, “That doesn’t mean that we are not naming the crisis for what it is. We’re certainly facing difficult years.”

Things are bad. Really bad. Need to do something yesterday bad. Worst has already happened and we’re only waiting to find out how bad, bad.

To meet the challenge, the memo from the Secretariat for the Economy recommends creating a central fund in the Administration of the Patrimony of the Apostolic See (APSA). Often styled the Vatican’s “central bank”, the APSA manages the real-estate and financial holdings of the Holy See and Vatican City. APSA also meets payroll and other obligations. It is also an opaque outfit, with anything but an untroubled history.

The idea of a central fund isn’t necessarily a bad one – Cardinal Pell floated it at the beginning of his turn as finance czar – but an investment fund is one thing, and a current account is quite another. Treating cash flow from one area to another as income is a recipe for disaster: it could be pretty much tantamount to taking money out of investment funds, putting it in your current account, and declaring yourself solvent.

Also, in every scenario, even the projected “worst” case, some successful cost containment is assumed: whence those savings?

There, the elephant in the room – sorry, reader – is personnel costs. On that count, this sentence is possibly telling: “There’s a need to ensure flexibility in the salary system in order to be able to reward competence and merit, and to be able to face critical periods like the present with adequate instruments.” There, too, one sees what might be a confusion of means and ends.

“There are three things that are not in question,” Fr Guerrero said in the Vatican News interview, “not even in this moment of crisis: the remuneration of the employees, aid for people in difficulty and support for the Churches in need.”

The “flexibility in the salary system” the Economy report mentioned might encourage good workers to do more and better down the road, but it can’t be achieved overnight and doesn’t help meet the present challenge.

“A structural reform would be desirable,” the report reads, “but the actual circumstances don’t seem favourable.” Structural reform, in this case, refers to the workforce: it needs to be smaller. Pope Francis, however, has been adamant about not firing people. He has been willing to conquer his compunction in a few recent, high-profile cases connected with alleged and suspected corruption, but has otherwise held the line.

Whether the mention of the business in his paper of choice is a not-too-subtle nudge, or a signal to the curial cardinals that they will have to elect someone willing to fire people, is a matter of conjecture. It could be a little of both.

Then, there is the revenue problem.

The APSA investments are in real estate: commercial investments will lose, because – to put it quite bluntly – you can’t collect rents from failed businesses. Property values will likely depreciate as well in the short term, making it difficult to borrow against the holdings and potentially creating problems for outstanding obligations.

Peter’s Pence is a cash cow for the Holy See. The projections anticipate a modest fall in annual collections – one that would not take the collection below recent lows – but anticipating a total in 2020 that is above the average of 2015-17 seems – how shall one put this? – rather more than merely optimistic.

As the Italians say, however, Il problema sta a monte: “The problem is upstream.”

Peter’s Pence is off-book: a discretionary fund at the pope’s disposal, which has been used to plug holes and meet operating shortfalls for years. You can’t run a structural deficit and then plug it with off-balance-sheet income. Either it’s on the balance sheet or, in accounting terms, it’s funny money.

In the aforementioned interview with Vatican news, Fr Guerrero said, “It is not correct to say that the deficit is financed by the Peter’s Pence collection, as if it were stopping a gap.” He went on to say, “Peter’s Pence is a donation of the faithful: it finances the mission of the Holy See, this includes the Pope’s charitable donations, which does not have sufficient revenue.”

The construction is awkward. It is the mission of the Holy See that does not have sufficient revenue. Also, the Italian version says, …come se l’Obolo riempisse un buco – literally: “…as though the Peter’s Pence collection were filling a hole.” Only, that’s exactly what it does.

If you do a thing for a reason, you’re doing the thing. The fact you have a reason to do a thing doesn’t mean you’re not doing the thing. Sometimes, you have to stop doing the thing. You can’t use an off-book revenue source to plug a hole, and at the same time, not use an off-book revenue source to plug a hole. Why you’re doing what you’re doing doesn’t change what you’re doing.

Even if the world economy were much better shape than it is, Peter’s Pence would have serious problems. A major financial scandal at the Vatican centered on a blue chip London real estate deal brought a dirty little secret before the public: for years, the Vatican has billed the collection as one primarily in support of papal charities, but actually uses the lion’s share of the Peter’s Pence proceeds to meet shortfalls and make and prop up investments.

The faithful – who would happily contribute to the support of the Holy Father and the Holy See – did not like it when they learned their money was not going where the collectors said it would be going. “We trust in the generosity of the faithful,” Fr Guerrero said in the Vatican News interview, but when one trusts in another’s generosity, one is usually forthright – rather than technically not mendacious – regarding one’s reasons for appealing to it.

The Vatican Museums – technically a Vatican City operation – also bring in significant revenues.

The problem there is that the global financial outlook is grim: We’re already in a global depression that could make ‘29 look like a dip after bad news on a Friday. Things won’t pick up until the second quarter of 2021 at the earliest. People will not be going on vacation. Getting the Museums open will be a money loser if people don’t come to visit.

Bottom line: financial reform is coming to the Vatican, and soon – more quickly and jarringly than anyone in the Vatican seems prepared to outface.

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