Next Pope Faces Financial Mess Francis Struggled to Clean Up

By Drew Hinshaw, Joe Parkinson and Stacy Meichtry

The Wall Street Journal
May 08, 2025
Soaring deficit and murky accounting practices persist at the Vatican

The ailing pope was short of breath, sitting beneath a cherished painting of Mary, Untier of Knots, as he worked through a last-ditch plan to disentangle the finances of one of the world’s most opaque bureaucracies.


For over a decade, Francis had struggled to bring some transparency to the Vatican’s shadowy balance sheet. Now, in the final weeks of his life, advisers were filtering in and out of his austere reception room, presenting the details of a microstate awash in priceless treasures but tumbling deeper into debt. The budget deficit had tripled since the Argentine took office, and the pension fund faced up to 2 billion euros in liabilities it wouldn’t be able to fund.


The first Jesuit Pope was exhorting clergy to live frugally—but pinching pennies alone would not relieve the financial crisis facing the seat of the Church. The Vatican was increasingly relying on museum ticket sales to fund its civil service, its worldwide network of embassies and the Papal Swiss Guard. The citystate serves seven million visitors a year and a global flock, without collecting taxes.


After more than a month of discussion, Francis settled on one solution: Ask the faithful for more money.


On Feb. 11, he signed a chirografo, or papal directive, to boost donations. Three days later, he was hospitalized with double pneumonia. On April 21, he died, leaving his soon-to-be-chosen successor with a similar economic puzzle to the one Francis had inherited.


“Those of us who live and work here are obviously all too aware,” said a cardinal who oversaw the Vatican’s humanitarian outreach under Francis, Michael Czerny. Cardinals gathering to elect a pope were given what he described as a “thorough report” on the Vatican’s finances: “I am concerned because of the effects on our mission, our staff, our programs.”


Twelve years ago, the new Bishop of Rome was Francis, elected with a mandate to fix the Vatican’s finances. But Francis wasn’t prepared for the degree of resistance at the Curia, as the Vatican bureau

cracy is known, his close advisers and allies said. He hired a professional auditor to modernize the finances—leading clergy to move Vatican funds to an account under a cardinal’s name and stockpile cash in a shopping bag. The auditor was mystified that nuns kept account ledgers in pencil and paper. At one point intruders broke into his office and tampered with his computer.


Professional accountants, encouraged by Francis, ran training workshops for clergy who balked at rules like obtaining multiple signoffs for expenses. Prelates tried to hide funds from scrutiny, citing national security concerns for the secret ledgers of funding missionaries in countries where proselytizing is a crime. The pope himself shifted focus to other topics. Meanwhile, the pension fund kept falling farther behind.


The problems will now fall to Francis’ successor, who will be chosen by cardinals from 70 different countries and territories in elections held in the Sistine Chapel. Cardinals from the U.S. and Germany—the countries with the biggest donor bases—have given lengthy presentations to their brethren on the fragile state of the Vatican’s finances and efforts to repair them. Others view the financial strains as earthly concerns that are secondary to the Church’s main mission of saving souls.


Under suspicion


To understand the combination of deficit spending and mismanagement that is driving the Vatican into unsustainable debt, Wall Street Journal reporters met officials from the Vatican’s bank, pension fund and regulatory institutions and with cardinals attending this week’s conclave. Several met in secret, citing an atmosphere of suspicion as the Vatican’s balance sheet deteriorates and blame circulates.


The first concern, they said, was a culture of financial malpractice that Francis was unable to defeat before his death. Shortly before the pope died, one of the banks managing assets for the Institute for the Works of Religion, or IOR, as the Vatican Bank is also known, cut ties—a sign of dwindling confidence in the Curia’s antimoney-laundering practices.


The deeper concern is the unforgiving math of running a cash-strapped country of tremendous wealth. Vatican museum walls are lined with the masterpieces of Michelangelo, Caravaggio and Leonardo. More than 1 million old and rare books are stored under the vaulted, frescoed ceilings of the Vatican Library, including some of the earliest extant Greek


language manuscripts of the Old and New Testaments. But the Vatican has no intention of ever selling off its inheritance. It lists many priceless works of art, including the Sistine Chapel, on its books at a nominal value of one euro each, as a way of indicating it prizes their religious and artistic significance over their financial worth. And yet the upkeep and insurance are burdensome.


The result is a paradox. A tiny country of unfathomable riches has been unable to sustain the basic functions of a state without running a perilous deficit.


“Five-alarm fire is what I tend to hear from people,” said Ed Condon, editor of The Pillar, the Catholic news website, about the Church’s finances, particularly the pension fund. “Some very, very unpleasant decisions are going to have to be made.”


A Vatican spokesman didn’t respond to a request for comment.


A new bank


Paying the bills wasn’t always so difficult for the pope. The crusades, the Sistine Chapel and Saint Peter’s Basilica were all financed in part by the sale of indulgences—an invention that allowed the faithful to buy a reduction in the time their soul would spend in purgatory, although the practice was considered so corrupt it helped spark the Reformation.


Into the middle of the 19th century, the Papal States taxed the rich farmland of what is now central and northern Italy, providing a steady income stream. That ended in 1870, when armies of the newly united Italy wrested Rome from Pius IX. That left a 0.2square-mile estate for what would become Vatican City.


With a population made up primarily of priests, nuns and church workers, it didn’t have much of a tax base. But the Vatican eventually realized it could leverage its tax-exempt status to become a financial hub, and its newly created bank over time took sizable shares in Italian and European companies.


The Vatican developed a reputation for murky financial practices, and the Vatican Bank was plagued by scandals, including allegations of money smuggling and laundering, for decades.


When Pope Benedict XVI was elected in 2005, the scandals were evolving into a financial crisis. The German pontiff established a unit to combat money laundering and asked Moneyval, Europe’s financial crimes watchdog, to look into accounts. For the first time, the Vatican Bank started releasing annual reports.


But by July 2012, Moneyval said the Vatican was still failing in almost half of its 16 key areas of financial standards.


In January 2013, Italy’s central bank lost patience and blocked all electronic payments to Vatican City, leaving tourists unable to take money from ATMs or use their bank cards. Priests had problems executing payments. Within a month, Benedict announced he would resign, the first Pope to do so since Gregory XII in 1415.


After Francis was elected in 2013, within weeks he had summoned a panel of cardinals to advise him. Moneyval warned that the Vatican Bank would be blacklisted if it didn’t tighten money-laundering rules. An internal report signaled to the new pope that the pension fund was in trouble.


Francis, who had witnessed the cost of financial mismanagement in his homeland of Argentina, established a new secretariat for the economy to run the Vatican’s finances. The group, made up of prelates and external financial experts, was led by Australian Cardinal George Pell. Jean-Baptiste de Franssu, a former chief executive of Invesco Europe, was tapped to run the Vatican Bank, which closed thousands of accounts, purging clients suspected of using the Vatican to evade taxes.


When Pell’s department began tracking budgets across the Curia, it riled the Congregation for the Doctrine of the Faith, the office that enforces church teaching. Those officials worried that Pell’s new department would seize control of funds they used for discretionary spending.


Cardinal Gerhard Ludwig Muller, who then led the doctrinal office, said the department’s treasurer returned from a briefing with Pell’s team one day in a state of alarm and advised that the congregation “save our money” by withdrawing funds from one of the congregation’s Vatican Bank accounts and storing the cash in a bag. The treasurer also transferred funds to a different bank account under Muller’s name— another attempt to conceal funding from Pell, Muller said.


The treasurer, Muller said, was an Italian prelate who struggled to communicate in English with Pell’s team and was “absolutely confused.”


Shortly after, in spring 2015, the Vatican hired Libero Milone, a former Deloitte executive, to become the Vatican’s in-house auditor. Pell asked him to look into the accounts of the doctrinal office, which was late in delivering its budget.


Milone eventually discovered that more than $500,000 was missing from the office’s Vatican Bank account—later found in a shopping bag and in the account under Muller’s name.


Milone reported his findings to the Vatican’s financial watchdog as well as the prosecutors’ office. But neither took action, he said. In early October 2015, Milone took the matter to Pope Francis himself. Francis wanted the auditor to simply fix the problem.


Milone said he met with Muller and the money was returned to the congregation’s account. Muller said that the handling of the funds was “a little bit strange or not modern” but that keeping access to the funds was vital for maintaining the congregation’s operations, whether it was hosting an international commission of theologians or buying office supplies. Getting funds from the Vatican’s treasury—known as the Administration of the Patrimony of the Apostolic See, or APSA—could take a year, he said.


Soon, Milone himself was in a power struggle with APSA, which functions as the Vatican’s Central Bank and clears Vatican transactions. After the auditor questioned APSA’s accounting practices, APSA began scrutinizing Milone’s own expense reports. As that fight broiled on, efforts to reform the pension plan stalled.


Break-in


In September 2015, Milone discovered his office had been broken into. He arrived on a Monday to find the bottom of his computer was unscrewed, with a spring missing, he said. Francis, instead of pressing for an investigation, proposed installing security cameras outside the office.


In March 2016, Milone began to press Archbishop Giovanni Angelo Becciu and other officials in the Vatican’s powerful Secretariat of State for documentation on the department’s 750 million euros in investments, half of which was in real estate, the auditor said. Becciu’s department declined to provide the documentation, Milone said.


In June 2017, Becciu summoned Milone to his office to deliver a message.


“The pope no longer has faith in you,” Becciu said, according to Milone.


Milone asked to see the pope, but the archbishop refused. Instead, Becciu phoned the Vatican gendarmes who detained Milone for 12 hours on suspicion he had hired private investigators to spy on Vatican employees. Milone denied the accusation, saying he had hired external consultants to investigate the tampering of his computer and to sweep for bugs in his office, which was outside Vatican walls. After the interrogation, Milone phoned his secretary to dictate his letter of resignation, he said, only to learn that the gendarmes already had a draft of one on file.


Lawyers for Becciu said the cardinal “didn’t block in any way the activities of the auditor,” adding that he was following orders. In meeting Milone, Becciu was “communicating a decision from the Holy Father,” the lawyers said, adding that the involvement of the gendarmes wasn’t Becciu’s call.


Convicted


The next year, Francis raised Becciu to the rank of cardinal. Two years later, he was an accused criminal. Vatican magistrates alleged Becciu had embezzled more than $100,000 through a nonprofit group run by his brother. The magistrates also alleged Becciu was negligent in overseeing what became a $400 million investment into a building in London. Becciu denied the charges; Francis told him to resign his Vatican post.


Becciu and nine others faced charges that also concerned the alleged misuse of money intended to free a kidnapped nun. Becciu was found guilty of fraud and embezzlement in 2023, a conviction he is appealing.


The struggle between Francis and the Curia over finances escalated. The Pope slashed the salaries for the Church’s 250odd cardinals three times. In early 2023, Pope Francis said he would stop providing discounted Vatican housing to senior officials.


Last September, Francis issued a letter demanding the Vatican set a rigorous timeline for achieving a “zero deficit” regime. A few weeks later, he signed another letter, warning the current pension system suffered “a serious prospective imbalance,” and predicted the Vatican would have to make “difficult decisions.” He died before any substantial decisions could be taken.


Some cardinals this week have been critical of the emphasis some have placed on the Vatican’s financial struggles.


“Jesus sent the Apostles and later the bishops into the world to preach the Gospel of salvation, redemption, hope to everybody. This remains the main issue for the Church,” Muller said. “The other questions—the financial state of the Vatican—it’s not so important for the essence.”