Vatican City (AP) – The smallest nation in the world is grappling with a significant budget crisis.
The Vatican does not impose taxes on residents or issue bonds. Its primary funding sources for the central government of the Catholic Church include generous donations, ticket sales from the Vatican Museums, investment returns, and a real estate portfolio that is underperforming.
In its consolidated budget for 2022, the Holy See projected an expenditure of 770 million euros ($878 million), which mainly covers the costs of embassies and Vatican media operations globally. In recent years, these expenses have outstripped revenues.
This scenario presents a challenge for Pope Leo XIV, who must find ways to generate funds to pull his city-state out of the financial deficit.
Declining Donations
While anyone can make a donation to the Vatican, two primary sources contribute significantly.
Canon law mandates that bishops worldwide pay annual fees, which vary at the discretion of each bishop, “according to the resources of the parish.” Vatican data indicates that U.S. bishops contribute approximately a third (19.3 million euros) of the total collected annually under the regulations for 2021-2023.
Another significant source of donations is more familiar to everyday Catholics. Peter’s Pence constitutes a special collection typically held on the last Sunday of June. From 2021 to 2023, individual American Catholics donated an average of $27 million (23.7 million euros) to Peter’s Pence, accounting for more than half of the global total.
Despite American generosity, contributions to Peter’s Pence have not remained steady. After peaking at $110 million (88.6 million euros) in 2006, the contributions dwindled to roughly $75 million (66.8 million euros) in the 2010s, eventually dropping to $47 million (41.2 million euros) by the end of the decade.
Following revelations concerning the Vatican’s investment in London real estate, donations plummeted the subsequent year. The scandal and subsequent legal proceedings revealed that a substantial portion of Peter’s Pence was used to address the financial shortfall of the Holy See, rather than funding the charitable initiatives, as many parishioners had been led to believe.
Although Peter’s Pence witnessed a modest uptick in 2023, Vatican officials are optimistic for future growth, especially as donations traditionally surge following papal elections.
New Donor
The Vatican Bank, which oversees the museum, along with the governors of the city and provincial states, also makes annual contributions to the Pope. A decade ago, the bank provided approximately 55 million euros ($62.7 million) annually to support the budget, but this amount has since declined. In 2023, the bank made no specific contributions to the Pope despite recording a net profit of 30 million euros ($34.2 million), based on financial statements. Similarly, contributions from the Governor’s office have diminished.
Some Vatican officials are questioning how the Holy See can expect donors to contribute generously when their institutions are financially constrained.
Leo emphasized the importance of attracting donations from outside the U.S. due to varying cultural traditions surrounding philanthropy. He noted that, in Europe, individual philanthropy is prevalent to a lesser degree and that businesses and government agencies primarily handle designated tax contributions.
More critically, he suggested moving away from a “supporting mentality” toward fundraising, advocating for Catholics to invest in the church as a broader initiative.
Shortly after Leo’s inauguration ceremony at St. Peter’s Square, which attracted about 200,000 attendees, it was posed:
In the United States, donation baskets are distributed every Sunday at Mass. This practice does not occur in the Vatican.
Underutilized Real Estate
The Vatican owns 4,249 properties in Italy and another 1,200 in cities such as London, Paris, Geneva, and Lausanne, Switzerland. According to the annual report from the APSA Patrimony Office, which manages these assets, only about 20% are rented at fair market value. Approximately 70% are occupied by the Vatican or other church offices, resulting in no income generation. The remaining 10% is leased to Vatican employees at reduced rates.
In 2023, these properties generated merely 35 million euros ($39.9 million). Financial analysts have long recognized these undervalued properties as potential revenue sources.
However, Ward Fitzgerald, president of the U.S.-based Pope Foundation, which supports the Pope’s charity, believes the Vatican should consider selling properties, especially those that are costly to maintain. Many bishops face similar challenges, as church attendance continues to dwindle in the U.S. and parts of Europe, leaving once-bustling churches virtually empty.
In line with this strategy, the Vatican has recently sold the property housing the embassy in Tokyo’s upscale Sanbancho district, adjacent to the Imperial Palace, to a developer planning a 13-story apartment complex.
Nevertheless, there has historically been institutional resistance to divesting even loss-making properties. In 2021, the Vatican announced that it would not sell the Roman Fatebenefratelli Catholic Hospital, run by a religious order. Pope Francis has also established and continued the Vatican’s fundraising foundation while promoting other Catholic hospitals.
“They need to recognize that they own an extensive amount of real estate that doesn’t fulfill the church’s mission,” said Fitzgerald, who has built a career in real estate private equity.
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Tokyo AP reporter Mari Yamaguchi contributed.
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Source: apnews.com