Vatican's red ink to be challenge for new pope

Revenue: Papal state, Holy See ran deficits in 2003 as investments performed poorly.

April 09, 2005|By BLOOMBERG NEWS

VATICAN CITY - Pope John Paul II's successor won't just face dwindling church attendance and an elderly priesthood: He also has to find new revenue to balance the Vatican's budget.

After making a gain for eight years, the Holy See, the central administration for the church, ran deficits in the three years through 2003, the Vatican's financial statements show. The separately run budget for Vatican City, the independent papal state in Rome, was also in the red in 2003, the latest year for which figures are available.

The papacy relies on earnings from about $1 billion in stocks, bonds and real estate, along with donations from Catholics around the world. While the Holy See benefited in the 1990s from booming stock markets and a strong dollar, its losses on currencies caused a 9.6 million-euro ($12.4 million) deficit in 2003, on revenue of 204 million euros.

"Vatican administrators, like many people, got accustomed to balancing the budget with great market gains," says Joseph Harris, a Seattle accountant who has done financial studies for several U.S. dioceses and writes a yearly analysis of the Vatican's finances. "Well, the market giveth, and the market taketh away."

John Paul, who died April 2, was buried yesterday in a crypt under St. Peter's Basilica after a ceremony attended by 200 political and religious leaders. About 2 million pilgrims descended on Rome to mourn the pope's passing. The new leader of the world's 1 billion Catholics will be chosen by a Conclave of Cardinals starting April 18.

The papacy will be increasingly strapped for cash unless it finds new sources of revenue, says Francis J. Butler, president of Foundations and Donors Interested in Catholic Activities Inc., an association of lay Catholic charities in Washington. The Holy See forecasts it will break even in 2005.

Catholic churches around the world donate about 80 million euros a year to the Vatican. Individual Catholics gave another 49 million euros in 2003 to be used by the Vatican for charities, according to the annual report.

"They just don't get a lot of contributions," says Butler. "It's a question of how generous the world's Catholics will be."

The new pope won't be able to use the church's priceless art treasures and four Roman basilicas to boost the bottom line. The Vatican has a policy of never selling its art.

The Italian government would block the export of any of the Vatican Museums' collection, which includes 460 paintings by masters such as Giotto, Caravaggio and Raphael, said Monsignor Claudio Maria Celli, 63, who is in charge of managing the Holy See's assets.

"That's our situation: so little liquidity and so many great art treasures," Celli said in an October 2003 interview in his office facing a portrait of Christ by Guercino, a 17th-century Bolognese painter. Two mobile phones and an Internet-linked Compaq personal computer provided reminders of the modern world.

"But how do you value Michelangelo's Pieta?" he asked, referring to the Michelangelo statue of a dead Christ draped over Mary's lap that sits in a side entrance to St. Peter's Basilica.

The Holy See and Vatican City are scheduled to announce their 2004 results in July.

Celli in 2003 said that he had shifted most of the Holy See's portfolio away from stocks and into short-term bonds. He didn't respond to a faxed letter asking for information about his current investment strategy.

The Holy See includes the Curia, whose 20 councils and congregations set church doctrine and policy; the pope's 118-embassy diplomatic corps, the Vatican's radio station and Rome real estate used to house clergy.

The Holy See's 2003 results included a 22.4 million-euro profit from renting buildings near the Vatican, and an 11.6 million-euro loss on investments, according to the annual financial statement. The loss on currencies alone was 32.8 million euros. During 2003, the Standard & Poor's 500 index gained 26 percent, while the dollar lost 17 percent against the euro.

Vatican City - the pope's temporal domain - had 2003 revenue of 145.9 million euros, up 5 percent, mostly from entrance fees paid by 3 million visitors to the Vatican Museums and the tax-free stores it operates for employees and diplomats. The 8.8 million-euro deficit came after the city paid 10.5 million euros to help the Holy See cover its losses at Vatican Radio.

The stores within the Vatican walls include a pharmacy that can import medicines not yet approved in Italy, a supermarket and a store housed in a restored old train station that offers Chanel perfumes and Cartier watches at as much as 50 percent cheaper than they cost elsewhere in Rome.

Combined, the cost of maintaining the Vatican's offices and its four Roman basilicas, paying the 123-man Vatican police force and housing the pope's 110 Swiss Guards rose 15 percent.

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