When Chile's Cardinal Jorge Estivez stepped onto a Vatican balcony on the evening of 19 April to declare 'Habemus Papam' - We have a Pope - he might well have added: '... and a new chairman of the board'. For, in addition to his role as the spiritual leader of the world's 1.1 billion Catholics, the newly installed Pope Benedict XVI has taken over the reins of what amounts to a multinational religious corporation.
Apart from his duties as guardian of his flock's faith and morals, the man nicknamed God's rottweiler has inherited the responsibility for managing a financial empire with billions of pounds of assets. Big it may be, but it is not in good shape. Last July, the Vatican listed revenues of just over $250 million and expenditure of $262 million, a deficit of nearly $12 million.
However, these figures represent just one element of the Vatican's notoriously labyrinthine finances. Chairman Benedict's conglomerate includes a multi-million pound share portfolio, a bank with billions of pounds on deposit, a $56 million charitable fund, and a city state - Vatican City - with its own Post Office and fire brigade, as well as some of the best-attended museums in the world.
To complicate these Byzantine matters even further, almost 20 other autonomous operations have budgets of their own, including three Vatican departments that distribute money to missions and dioceses around the world. All of which makes it nearly impossible to put a real figure on the assets commanded by the new pontiff. As one observer once put it, the Vatican's fiscal arrangements can seem as 'impenetrable as a thick cloud of incense'.
Popular attitudes to the Vatican's finances have been shaped by the Banco Ambrosiano affair of the early 1980s. Its head, Roberto Calvi, was found guilty of illegally exporting currency, fined $11.7 million and jailed for four years. While on bail pending an appeal, Calvi travelled to London and was found hanging from scaffolding beneath Blackfriars Bridge, his pockets full of bricks.
When Calvi's bank subsequently went bust owing $1.2 billion, Pope John Paul II felt an obligation to its creditors - much of the money had been loaned to a series of shell companies in Panama and Luxembourg controlled by the Institute of Religious Works, more popularly known as the Vatican Bank. Payments totalling $244 million were made in return for the creditors dropping any further claims against it.
It was concluded that Archbishop Marcinkus, the American head of the bank, had suffered from his lack of expertise in a complex sector. After all, a spell in a seminary followed by stints at various parishes may equip a priest better to debate theology and wield a censer than to manage an international bank.
This realisation prompted something of a revolution in the management of the Vatican's sprawling network of business interests. As a result, Benedict XVI will find that he and his administrative clerics have some formidable lay experts to help them avoid the perils and pitfalls of the temporal realm.
A leading example of this more professional approach to money is the management of the share portfolio controlled by the Administration of the Patrimony of the Holy See (Apsa), headed by Archbishop Claudio Celli. His department is responsible for investing the monies awarded to the Vatican under the Lateran Treaty of 1929, by which the Italian government gave the Vatican $92 million to compensate for the loss of the papal states in 1870 during the unification of the country. Key properties lost included the majestic Quirinal Palace, once the papal residence and now home to Italian president Carlo Ciampi.
Obtaining an audience with a senior Vatican apparatchik is only marginally easier than understanding the mystery of the Holy Trinity, however, and Monsignor Celli is no exception. The Vatican press office is often described as being 'about as helpful as the Kremlin', but an approach to Sister Simona, Celli's assistant, eventually yields an appointment and, after running the gauntlet of the Swiss Guard and police officers at the Vatican's Porta Santa Anna, MT is granted entry to Apsa's HQ.
On the third floor, the only sounds that greet the visitor are the muffled singsong of Italian conversation, the swish of cassocks and the clip-clop of the nuns' sensible shoes on the marble floor. After a brief wait outside an ante-room, the archbishop himself appears. Celli, a tall, balding man in a black cassock, with gold-rimmed spectacles and kindly demeanour, is anything but the hard-faced Vatican enforcer of legend. Indeed, he waxes nostalgic about his younger days helping out at St Chad's in the London suburb of South Norwood during holidays to improve his English.
He proves an amiable guide to the workings of Apsa. A portion of that original $92 million stake was immediately earmarked for construction projects in the Vatican, but the rest was set aside as an investment fund. Until recently, the administration of this fund would have appalled bonus-hungry private-sector managers. Terrified by the relative volatility of equity investments, the Vatican's timid fund managers put much of their money into conservative options, such as gold and bonds.
To this day, it describes its investment regime as 'safe if low yield'. As Father Thomas Reese, an American Jesuit, wrote in his book Inside the Vatican: 'Most prelates at the very top have no training in finances and have trouble understanding financial reports if they ever look at them.' Today, the fund is overseen by a committee of cardinals, appointed by the pope and an advisory council of lay consultants, which could be compared with a board of directors and a group of non-execs.
It is among these lay advisers that the Vatican's financial brains are to be found. There are five in all, including William Schreyer, a former president of Merrill Lynch in New York, and Dr Mario Orazi, president of Italy's Interchange Bank until his retirement. The British representative on this council is Lord Camoys, 64, a former Lord Chamberlain to the Queen who was once on the board of Sotheby's.
Celli stresses that the consultants (who meet 'at least' twice a year at the Vatican, but are consulted on an individual basis more frequently) are selected for their professional abilities rather than their piety. But, like all the other advisory group, Lord Camoys is a practising Catholic; indeed, the chatelain of Stonor Park in Oxfordshire is the descendant of one of the country's most prominent recusant families. He is not in a position to discuss his role, however: consultants take an oath of confidentiality.
Back to Celli: 'They give suggestions about how to make investments and how to elaborate our basket of currencies. We are investing our capital in different companies and various currencies: dollars, Swiss francs, pounds. Profit is not the only criterion; there are ethical considerations. We do not invest in companies that make weapons or products that are against life.'
More subtle judgments are made too. In his book, Reese describes the approach of Monsignor Robert Devine, an Apsa employee who owned a successful investment firm in Canada before selling it to Merrill Lynch and entering a seminary. When Devine spotted a newspaper report that one of the companies in which Apsa had a stake was trying to sell engines to China for military use, it became 'a candidate for sale'.
Celli would not disclose the size of Apsa's investment fund, but Reese wrote that its portfolio of stocks and bonds was valued at £200 million in the mid 1990s. As it also has currency holdings and property assets, we can assume the current total is much higher.
Like Apsa, the Vatican Bank has its own 'non-execs'. The president of this group is Professor Angelo Caloia, an economics professor based in Milan, and its vice-president is Virgil Dechant, former president of the Knights of Saint Columbus, a large Catholic charity in the US. They advise the bank's lay director-general, Lelio Scaletti.
Asked to put a figure on the bank's deposits, Celli says: 'I cannot tell you anything. I don't know.' He suggested contacting Dr Scaletti, but added: 'I doubt that he will be inclined to give you such figures.' In his book, Reese revealed that Cardinal Castillo, the Venezuelan cardinal then responsible for the bank's affairs, told him in 1994 that the bank had $4 billion on deposit and a net income of $40 million. Reese added that it was believed the bank had a further $1 billion in working capital.
Although chairman Benedict is in a position to keep the workings of institutions such as Apsa and the Vatican Bank at arm's length, one budget is in his own, very personal, gift. Peter's Pence is the money obtained via a collection taken once a year in every parish of every Catholic diocese around the globe - normally during mass on the feast of Saints Peter and Paul on 29 June, a Holy Day of Obligation. The proceeds are sent to the Vatican for the pope to use for charitable purposes.
Last year, Peter's Pence amounted to $56 million. 'I can tell you that it's not enough,' says Celli, 'because the different situations are so many and so heavy. The Holy Father might contribute to an earthquake or disaster appeal, and he doesn't help only Catholic communities. There could be an earthquake in an Islamic country and he would give to that.'
But most of the cash is believed to go to help the church in developing countries. And John Paul II's spontaneous generosity in this regard was such that Vatican officials learned to be well prepared when petitioners came calling, as one such attendant recalled while the former pontiff was still alive. 'When the bishops from the poor countries come to see the pope, we are scared to death because at the end of the visit all our accounts are empty. Very often, we receive a telephone call from his apartment at 10pm: "Before 12 o'clock, I need 10 envelopes with $50,000 each". He is very, very generous.'
John Paul would often use part of Peter's Pence to alleviate the Holy See's persistent deficits. In 1993, however, after 23 years in the red, the Roman curia made a small surplus, and it was not until 2001 that it plunged into deficit again. By 2003, the shortfall had reached $11.8 million, thanks to the falling dollar (much of the Holy See's income from the US and high-net-worth individuals in the Third World is in dollars), the Vatican's expanding diplomatic mission - it has representatives in 174 nations - and the cost of sex abuse settlements.
While the Vatican itself is not vulnerable to legal actions from victims of paedophile priests - Western dioceses are corporate entities and no case can stretch as far as Rome - the total paid out by the US church alone is now approaching £500 million, which affects the ability of the Americans to maintain high financial contributions to the centre. The situation is so dire in three dioceses - Spokane, Washington; Portland, Oregon; and Tucson, Arizona - that they've sought bankruptcy protection.
The dollar's dip against the euro was particularly unfortunate for the Vatican, as more than half its 2,674 staff are lay people and are paid in euros. Pay scales in the Catholic church vary from country to country and even diocese to diocese, but priests and nuns, it has to be said, are extremely cheap labour. Although a cleric in London, for example, is paid a lot more than one in New Delhi, he doesn't live like a king.
Priests working in parishes in the Westminster diocese receive a recommended minimum salary of £7,200, but supplement this with Christmas and Easter collections from their congregations. Most, therefore, receive between £9,000 and £10,000 per annum - in effect, pocket money, because their living costs are paid out of parish funds.
Bishops' stipends don't differ much from priests', but because they have few opportunities to supplement their income from collections, the diocese makes up the shortfall. Britain's most senior churchman, Cardinal Cormac Murphy-O'Connor, 'is neither discriminated against nor given special favours', according to Westminster Cathedral. As he is 72, he receives the standard clergy pension. 'But,' as his spokesman puts it, 'he doesn't live rough.' A small community of nuns cooks his meals and takes care of his laundry at his substantial SW1 residence.
What is remarkable about the Catholic Church among similarly large organisations (one recent estimate put its global worth at around the $1 trillion mark) is its flat management structure. Between the foot of the ladder and the top are only five rungs: priest, assistant bishop, bishop, cardinal and pope. There's also a notable absence of any of the management assessment or evaluation systems that would be found in an equivalent secular corporation.
Back in Italy, the finances of the Holy See are managed by Cardinal Sergio Sebastiani, who is often under pressure from detractors to justify the Vatican's vast collection of art and statuary. The Church responds by arguing that artworks such as Michelangelo's Pieta and the sculptures of Bernini are 'a treasure for all humanity' and cannot be sold. While it does not value these in the Consolidated Financial Statements of the Holy See - which do not include the finances of the Vatican City, the Vatican Bank or autonomous agencies - it does say its real estate is worth EUR700 million (leaving aside St Peter's Basilica and the Sistine Chapel, which it regards as priceless and values at a symbolic EUR1). These accounts also include Vatican Radio, with a staff of more than 400, and L'Osservatore Romano, which is published in daily, weekly and monthly editions, and sells about five million copies a year.
And what of the new incumbent? Given his famed asceticism, Benedict XVI seems likely to take a more pragmatic and less flamboyant approach to fiscal matters than his predecessor. But one mustn't forget that as Cardinal Ratzinger, he made his name as the Church's foremost living theologian and he is likely to want to spend much more time contemplating the ramifications of stem-cell research than the health of the greenback.
It is thanks to what is now a fairly sophisticated management structure that he is in a position to do so.
EARTHLY TREASURES - THE PAPAL PORTFOLIO
$4bn The amount the Institute of Religious Works, or Vatican
Bank, has on deposit*
$1bn: The Vatican Bank's estimated fund of working capital*
$908m: The value the Vatican puts on its real estate
$250m: The Holy See's income in 2003
$244m: The amount paid out by the Vatican Bank to creditors of
the collapsed Banco Ambrosiano
£200m: The size of Apsa's investments in stocks and bonds*
$56m: The amount collected in 2004 for Peter's Pence
$40m: The Vatican Bank's net annual revenues*
$11.8m: The Holy See's deficit in 2003
EUR1: The book value of St Peter's Basilica and the Sistine Chapel
* Figures quoted in Father Thomas Reese's book Inside the Vatican
SUCCESSION PLANNING - VATICAN-STYLE
Young cardinals, they say, vote for old popes, and they certainly did so in April. At 78, Pope Benedict XVI is a good deal older than most (if not all) of the world's other big corporate leaders and he will already be under pressure to make provision for what happens when the time comes to move on. In the case of the pope, that means accommodating a possible future health crisis.
As a result of medical advances, more and more people spend months, if not years, in declining health, and although the church will countenance the withdrawal of life support from the brain-dead, it is immovable on the right to life of people in less serious conditions. This raises the spectre of a seriously incapacitated pope.
The fact that the Terry Schiavo 'right to die' controversy in the US coincided with Pope John Paul II's final days and the fear that he might fall into a coma, leaving the church no choice but to leave him nominally in post, prompted much debate over how to prevent a similar problem arising in future.
Resignation when the first signs of frailty appear would seem to be the easiest course. While this is theoretically possible under the 1917 Code of Canon Law, Paul VI once said that paternity cannot be resigned and feared that the abdication of one pope would put pressure on his successors to follow suit. And how can someone who is chosen by divine edict step down anyway?
An alternative strategy would be to delegate authority. As it stands, a sickly and ageing pope can pass much of his workload to his secretary of state or personal secretary. And if the pope were to fall into a coma suddenly, without having had the chance to apportion responsibilities, Vatican officials could continue in their existing roles. But this would leave a situation in which nobody would have the authority to appoint bishops or cardinals, or pen encyclicals on the pressing moral issues of the day.
It would be even more problematic if the pope became senile. As Father Thomas Reese says: 'In the good old days, his staff might lock him in his rooms and run the church until he died. In the bad old days, someone would poison him. Either strategy would be difficult to carry out today in the full blaze of media attention. The ability of modern medicine to keep the body alive while the mind is deteriorating will eventually present the church with a constitutional crisis.'
The solution could lie in US law. When President Woodrow Wilson had a stroke after signing the Versailles Treaty in 1919, he was bedridden for much of the last 17 months of his term and his wife controlled access. To avoid such a crisis in future, an incapacitation clause was introduced.