Pope Francis Battles Financial Crisis In The Vatican
Before being hospitalised for double pneumonia, Pope Francis encountered significant resistance from some of his own cardinals regarding efforts to address the Vatican’s growing financial deficit.
Three days before his hospitalisation, Francis established a new high-level commission aimed at increasing donations to the headquarters of the 1.4-billion-member Catholic Church. The “Commission on Donations for the Holy See,” announced by the Vatican on Wednesday—while the pope remained in the hospital for the 13th day—was created following pushback from within the Roman Curia against his proposed budget cuts.
In a closed-door meeting late last year, senior Vatican officials, including top cardinals, objected to reducing spending and resisted the pope’s proposal to seek external funding to cover the shortfall, according to two officials who spoke to Reuters. These officials requested anonymity due to the sensitive nature of the discussions.
Despite his hospitalisation, Francis, known for his demanding work ethic, has continued leading the Vatican, with staff appointments requiring his approval being announced daily.
The pope has been working for years to stabilise the Vatican’s finances, implementing salary cuts for cardinals three times since 2021 and enforcing a “zero deficit” policy in September. However, these efforts appear to have had minimal impact.
The Vatican has not released a full budget report since 2022, but its most recent accounts, approved in mid-2024, showed an €83 million ($87 million) deficit, according to the two officials. Reuters was unable to independently verify this figure.
Although the Vatican has long managed deficits by reallocating funds and using investment income, the financial gap has widened significantly in recent years. In 2022, the reported shortfall was €33 million.
Two cardinals responsible for overseeing the Vatican’s budget declined Reuters’ interview requests and did not provide updated financial information. The Vatican also did not respond to a request for comment.
Mounting Pension Liabilities
Adding to financial concerns is the Vatican’s pension fund, which was estimated at €631 million in liabilities in a 2022 interview with the Vatican’s finance chief. While there has been no official update since, multiple insiders told Reuters they believe the figure has significantly increased.
“The Vatican will be forced to make tough choices,” said Rev. Tom Reese, a Jesuit priest and commentator on Vatican finances. He warned that the Holy See might have to scale back charitable initiatives or reduce its diplomatic presence worldwide.
“The pope’s influence could be significantly diminished,” Reese added. “If you can’t pay your bills, your ability to operate is limited.”
The precise reasons behind the Vatican’s growing deficit remain unclear. The Vatican suffered a major drop in tourism revenue during the COVID-19 pandemic, and in October, the pope announced budget cuts to the Vatican’s multilingual media operations, which cost at least €40 million annually.
Although the Vatican is the global Catholic headquarters, it mainly manages its own budget, while most dioceses and religious orders control their own finances.
During the recent budget discussions, the pope suggested Vatican departments seek external funding to balance their finances and avoid staffing reductions, according to the two officials. However, several cardinals raised concerns, arguing that relying on outside funding could lead to conflicts of interest for the Church.
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It is unclear what specific funding sources Francis had in mind. Some insiders pointed to independent Catholic foundations in the U.S. and Europe, which determine their own financial priorities, as potential contributors.
The newly established commission, announced Wednesday, has been tasked with encouraging donations from lay Catholics, national bishops’ conferences, and other benefactors.
Limited Financial Options
In November, the pope appointed a new administrator for the Vatican’s pension fund, warning that structural changes may be necessary, though he provided no further details. The fund has not publicly disclosed its financial records.
Many pension funds underestimate retirees’ life expectancy, leading to financial shortfalls. Italy’s average life expectancy rose from 69 in 1960 to 83 in 2022, and it is unclear whether the Vatican has adjusted its projections accordingly.
“If life expectancy assumptions are wrong, that could be a major issue,” said Gregory Kearney, a researcher at Stanford University specialising in failing state pension funds in the U.S.
The Vatican, a small sovereign entity within Rome, has limited financial tools. It does not issue debt, sell bonds, or levy taxes. A 2010 agreement with the EU restricts the Vatican to issuing a fixed amount of euro coins annually, initially capped at €2.3 million.
The Vatican relies on three primary income sources: donations to the pope’s official fund, investment revenue—including an extensive real estate portfolio of over 5,000 properties, mostly in Italy—and admissions to the Vatican Museums.
The museums, a key revenue source, suffered financially from COVID-19 lockdowns but have seen a resurgence in visitors since 2023.
In 2024, the Vatican reported a €45.9 million profit from investments, though it did not specify whether it had sold assets. Of this amount, €35 million came from improved rental property management.
Donations to the Vatican have remained relatively stable at around €45 million annually over the past decade, with peaks of €74 million in 2018 and €66 million in 2019.
However, Ed Soule, a business professor at Georgetown University, warned that wealthy Catholic donors might hesitate to contribute if they believe their money is being used to cover pension shortfalls rather than charitable efforts.
“Many donors wouldn’t be interested in funding an unfunded pension,” he said. “That’s not what motivates people to give.”
Hopes for Jubilee Revenue
The Vatican’s financial challenges come as it prepares for a surge in visitors in 2025 for the Catholic Holy Year, or Jubilee, which is expected to attract 32 million tourists.
Many of these visitors will pay at least €20 for museum entry. “This will certainly bring significant revenue to the Vatican,” said historian J.F. Pollard, who has studied Vatican finances.
However, not all of this income will address the deficit, as the museum’s earnings must cover staff salaries, exhibition costs, and conservation projects.
Reese cautioned that the Jubilee’s revenue would not be enough to eliminate the deficit. “It’s not like the pope is charging $1,000 per pilgrim,” he said.
Given the ongoing financial strain, Reese speculated that Francis—who is 88 and has faced multiple hospitalisations in recent years—might consider selling off parts of the Vatican’s investment portfolio to address the deficit.
While selling assets would provide immediate relief, it would reduce future investment earnings.
“This would delay the financial reckoning,” Reese said. “But whether it’s the next pope or the one after that, the problem will eventually come due.”
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