To avert an even worse financial crunch, Benedict dispatched Monsignor (later Cardinal) Bonaventura Cerretti to America to plead for a million-dollar loan from the American branch of the church.43 The secretary of the United States Conference of Catholic Bishops dubbed Cerretti’s trip a “begging mission.”44 The U.S. bishops again refused, but they arranged for the Knights of Columbus—an influential Catholic men’s service society—to give the Pope a substantial gift of $250,000.45 American dollars were especially valuable as they had appreciated nearly 90 percent against the lira during the war.46
Money problems continued front and present when the sixty-eight-year-old Benedict unexpectedly died from complications from influenza in January 1922. The church was in such dire straits that Secretary of State Gasparri had to arrange another Rothschild loan to pay for Benedict’s lavish funeral, the ensuing Conclave of Cardinals, and the coronation of the next Pope.47
• • •
It took a grueling fourteen ballots at the ensuing conclave before the cardinals settled on another compromise, Milan’s sixty-five-year-old Cardinal Achille Ratti. He became Pius XI. Ratti was the son of a Milanese factory manager. An ex-archivist in the Vatican Library, the bookish Ratti had dual doctorates in theology and canon law. As a voracious reader and scholar, he likely had a better appreciation of the historical and political significance of the Papacy than most of his predecessors.48
Pius was short, thickset, softly spoken, and charming. He also had a well-deserved reputation for a volatile temper.49 His aides knew he demanded absolute obedience. In meetings his intense questioning at times made him seem like a prosecutor. Once apprised of the church’s fiscal mess, he ordered its first-ever internal audit. He slashed the size of the Papal Court and cut some of what he deemed unnecessary pomp that Benedict had reinstituted. Pius appointed Signora Linda, his longtime maid, to supervise the Vatican’s large housekeeping staff. When told that no Pope had ever allowed a woman to work or live inside the Vatican, he replied: “Then I shall be the first.”50
Money woes weren’t the only matters occupying his early tenure. Political upheaval gripped Italy. The country’s parliamentary coalition was in trouble, with the traditional liberal and conservative blocs deadlocked. Leftist militants were gaining momentum, and there was an upsurge from the radical right’s National Fascist Party. Fascist paramilitary squads had targeted Catholic social institutions in central and northern Italy and had also besieged the powerful Catholic Partito Popolare Italiano (Italian People’s Party) with a venomous propaganda campaign. All the chaos culminated only eight months after Pius’s election with the “March on Rome.” Tens of thousands of armed fascists converged on the capital to demonstrate their political clout. After a tense one-week standoff with the King and the elected government, the fascist leader, Benito Mussolini, was sworn in as Prime Minister.51
Before Mussolini’s unexpected ascent, Pius had rejected any accommodation with fascism. There seemed to be little room for compromise with a man who was an avowed atheist, had written a pamphlet titled God Does Not Exist, and had once suggested to a newspaper that the Pope should leave Rome.52 Il Duce (the leader)—the name Mussolini preferred—climbed to power on the back of a strong anticlerical platform that called for confiscating church property. He had once described priests “as black microbes who are as deadly to mankind as tuberculosis germs.”53
Pius, a political realist, was not in the least sympathetic to fascism. Nevertheless he felt that appeasing Mussolini might be the best way to ensure peace between the church and state.54 The Pope believed that an autocrat was necessary to check embedded government corruption as well as to control the political instability fueled since the end of World War I by record unemployment, mass strikes, and a growing anarchist movement.55 Pius dispatched a trusted cleric, Father Pietro Tacchi Venturi, to convince Mussolini that the church was not an enemy. A self-described “good Jesuit and good fascist,” Venturi believed the church’s most dangerous enemy was the “worldwide Jewish-Masonic plutocracy.”56
The Pope’s outreach to Il Duce came at the right moment. Although the Pontiff had lost much of his temporal power, he still carried great moral influence inside Italy.57 Mussolini, a savvy politician, knew that while his anticlerical rhetoric was popular inside his party, now that he was prime minister he needed the Vatican’s endorsement to consolidate broader support in a country that was 98 percent Catholic.58 So he decided to forge a temporary peace with the church and then move against the Vatican in later years when he was in absolute control. Only a handful of his top ministers knew about his long-term strategy.59 For public consumption, Mussolini appeared to court the Vatican.60 Not long after taking power he reintroduced religious studies into state primary schools, provided some money for restoring churches, and even allowed crucifixes into public buildings from which they had been banned since 1870.61
One of the first tests for the budding alliance happened early in Pius’s reign. The Bank of Rome, entangled in another financial crisis, needed cash. The Vatican was still the bank’s major investor. Pius did not have any spare money so he dispatched Secretary of State Gasparri to meet with Mussolini. Carlo Santucci, the president of the bank, allowed the pair to meet at his central Roman palace. It was the first direct contact between the Vatican and the Italian state since the loss of the Papal States.62
Il Duce agreed to bail out the bank.63 The price for the Vatican was that Mussolini personally selected fascist directors to replace the church’s trustees on the bank’s board. The bank’s payments to the Catholic press and political parties were terminated.64 Also, Mussolini required the Vatican to stop its subsidy of the main Catholic party, the Partito Popolare Italiano, and to cut off all support for Confederazione Generale Italiana del Lavoro, the enormous Catholic trade union, as well as its agrarian cooperatives and credit unions.65
By 1928, the internal audit Pius had ordered was ready. It had taken six years to complete and concluded what many suspected: the Vatican was down to its last dollars.66 The Pope authorized the church’s first-ever bookkeeping system and ordered a rudimentary budget. But not even the first official confirmation of the frightful state of the Vatican’s finances was enough to compel Pius to loosen the church’s restrictions on commercial investments. Instead, that same year he banned bishops and priests from any involvement in banking, even with Catholic institutions, unless they agreed to be personally liable to the faithful for any losses.67 Rather than looking for ways to revive the Vatican’s failing investments, the Pope seemingly put his faith in fascism. Mussolini’s Blackshirts would not allow the church to go under, Pius reasoned, so long as they considered the church an ally. Pius had no idea that Mussolini had barely enough money to fuel his own visions of grandeur, much less help bail out the Vatican.
When Mussolini unveiled an ambitious and expensive redesign of Rome as a triumphant celebration of fascist power and architecture, Pius worried that such a grandiose capital might overshadow the Vatican. The Pope countered with his own impressive building plans.68 Pius’s projects were unrealistic, given the state of the church’s treasury.69 While Pius talked incessantly about his impressive vision, many Vatican employees grumbled about low salaries and a decade without any pay raise. Instead of constructing new buildings, some wondered aloud: Why not take better care of the existing ones? Large swaths of Vatican City were crumbling. Mold and mildew threatened some of the church’s priceless art collection, there were leaks in St. Peter’s, and vermin infestation was rampant.
Even when Pius realized that his plans were impossible, he refused to allow his advisors to embrace modern finances. Pius had a better idea: the Vatican should tap simply its rich new relative in America. There was widespread disdain inside the Vatican toward Americans. But the Pope believed the American church might prove to be the Vatican’s economic salvation, as its followers were rich.70 In 1928, the Chicago Archdiocese arranged a $300,000 loan and also allowed its property to be used as collateral so the Vatican could borrow 3 million lire.
71 Since the middle of the Roaring Twenties, American Catholics were the largest contributors to Peter’s Pence.72 To show his appreciation, Pius made a Chicago seminary a pontifical university, an elite status that eluded many long-established and prestigious institutions.73 The British Minister to the Holy See told London that Pius’s elevation of archbishops Mundelein of Chicago and Hayes of New York as cardinals was prompted by “American gold,” and that “it is not so much of an exaggeration to say that the United States is now looked up to as if it were the leading Catholic nation.”74 Before their promotion, there had been only three cardinals in America’s history. And within a few years Pius would confer the high honor of Papal Orders on more than one hundred U.S. citizens. Seven were given noble titles.75
The financial aid from America alleviated the Vatican’s money woes, so much so that Pius and his top clerics had by the late 1920s shifted their focus from finances to national politics. The prominent internal debate was about whether the Vatican should sign a formal agreement with Mussolini’s fascists, one that would officially acknowledge the rights of both to exist and flourish. Mussolini had created the climate for such a deal. In addition to soft-pedaling his anticlerical vitriol and reinstituting elements of religious life into Italian society, his wife, Rachele, and their two sons and daughter were baptized in a public rite in 1923.76 In 1926, although he and his wife had married in a civil union eleven years earlier, they renewed their vows in a religious ceremony. And in 1927, the man who used to boast that he had never been to a Mass was himself baptized. Although all of those moves were symbolic, Mussolini’s instincts were good. Such theater defused much of the opposition from the country’s devout Catholics. While courting Catholics, Mussolini also had to quell opposition in his own party. Many hard-core fascists hoped for the demise of the church. They contended that any alliance with the Pope would not only violate their core principles but would lead to the “Vaticanization” of Italy.77
Pius knew there was some resistance in the Curia to such a deal. He was the first Pope since the church had lost the Papal States even to consider restoring relations with the Italian state. His four predecessors had labeled themselves prisoners in the Vatican and refused any direct communication with the government. Ultimately, instead of trying to gauge popular sentiment inside the church, the Pope followed his intuition. Father Pietro Tacchi Venturi, Pius’s liaison to Il Duce, encouraged Pius to make an agreement. Tacchi Venturi assured him that Mussolini, notwithstanding any shortcomings, could be trusted to keep his word.78
What followed was nearly two years of intense talks.79 Tacchi Venturi and Francesco Pacelli, an attorney, shared the role as the church’s negotiators.80 (There was increasing talk that Francesco’s brother, Eugenio Pacelli—later Pius XII—might soon be the Cardinal Secretary of State.81) On February 11, 1929, the Vatican and the fascists signed the Lateran Pacts, sometimes referred to as the Lateran Accords, consisting of three parts: a political treaty, a concordat that set forth the terms of the relationship between the Holy See and the state, and a financial convention.82 The Accords—named after the Vatican’s sixteenth-century Lateran Palace, built on the site from which the Crusades were launched—gave the church the most power it held since the height of its temporal kingdom.83
The political treaty set aside 108.7 acres as Vatican City and fifty-two scattered “heritage” properties as an autonomous neutral state. It reinstated Papal sovereignty and ended the Pope’s boycott of the Italian state that had been in place since the Papal States were lost.84,II The Pope was declared “sacred and inviolable,” the equivalent of a secular monarch, but invested with divine right. A new Code of Canon Law was established, which included two of Pius’s key demands: that the Italian government recognize the validity of church marriages and that Catholic religious education be obligatory in both primary and secondary state schools.86 Cardinals had the same rights as princes by blood.
The concordat granted the church immense privilege. Most important was its declaration that Catholicism was fascist Italy’s only religion. Freemasonry was outlawed, evangelical meetings in private homes banned, and Protestant Bibles forbidden. Marriage was acknowledged as a sacrament. All church holidays became state holidays. Priests were exempted from military and jury duty.87
The three-article financial convention—the Conciliazione—granted “ecclesiastical corporations” a tax exemption. It also compensated the Vatican for the confiscation of the Papal States with 750 million lire in cash and a billion lire in government bonds that paid 5 percent interest.88 The settlement—worth about $1.3 billion in 2014 dollars—was approximately a third of Italy’s entire annual budget and an enormous windfall for the cash-starved church.89 The Vatican wanted double that, but Mussolini persuaded the Pope and his negotiators that the government was itself in precarious shape. It could ill afford anything more.90 As an extra inducement, Italy agreed to pay the meager salaries of all 25,000 parish priests in the country.91
“Italy has been given back to God,” the Pope told the Vatican newspaper L’Osservatore Romano, “and God to Italy.”92 The church threw its full power behind the fascists.93 The Vatican disbanded its influential Partito Popolare Italiano and exiled its leader from Italy.94 Italian bishops swore an oath of allegiance to the fascist government and clerics were prohibited from encouraging the faithful to oppose it.95 Priests began offering prayers at Sunday Masses for Mussolini and for fascism. Some clergy joined the National Fascist Party and a few even served as officers.
The Lateran Pacts converted Mussolini into a hero for devout Italians. Many homes soon had a picture of Il Duce hanging next to one of the Pope or a crucifix.96 Even Hitler hailed the church for “making its peace with Fascism.”97 The influential Cardinal Merry del Val said Mussolini was “visibly protected by God.”98
National elections were held only a month after the Lateran Pacts were signed. The Vatican knew it needed Mussolini’s government in power to ensure that parliament approved the agreement. So priests used their pulpits to urge Catholics to vote for the fascists. In those elections—the first time women voted—the National Fascist Party won an astonishing 98 percent of parliamentary seats.
On July 25, 1929, for the first time since Pius IX declared himself a “prisoner Pope” in 1870, a Pontiff ventured outside the Vatican. Mussolini told his followers in parliament that their Fascist Party “had the good fortune to be dealing with a truly Italian Pope.”99 Milan’s archbishop called Il Duce “the new Constantine.” Pius declared him a “man sent by providence.”100 The partnership between the Vatican and Mussolini was in full bloom.101
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I. Despite Gerlach’s conviction for espionage, the Vatican continued through the war to seek his advice on matters concerning Germany. When Gerlach left the priesthood after the war, Germany, Austria, and Turkey awarded him military service decorations.29
II. The Vatican is the world’s smallest sovereign nation, only two-thirds of a mile wide and half a mile north to south. Its perimeter can be walked at a leisurely pace in about forty minutes. Tiny Monaco is six times larger. And a third of the Vatican is set aside for lush manicured gardens and ornate grottoes. It has no natural resources and must import all food, energy, and labor. At the time of the Lateran Pacts, the new country had only 973 citizens, the overwhelming majority of whom were celibate priests.85
6
“The Pope Banker”
The Lateran Pacts settlement left the church with more cash than it had had at any time since it lost its empire. Pius was troubled that he had no competent financial advisor to fill the gap left by Ernesto Pacelli’s fall from grace fifteen years earlier. As he made inquiries, one name topped everyone’s list: Bernardino Nogara.
Pius ordered a background report. The information that came back was good. A devout Catholic who never missed a morning Mass or afternoon devotional, the fifty-nine-year-old Nogara came from a middle-class farming family in a small village near Lake Como.1 He had graduated with honors in industrial
and electrical engineering from one of Italy’s premier schools, Politecnico di Milano. In his first overseas job in 1894, he oversaw mining operations in south Wales. That is where he became fluent in English, as well as where two years later he met and married his wife, Ester Martelli.2
After returning to Italy in 1901, he reached out to an acquaintance, Giuseppe Volpi, a Venetian seven years his junior who was in the early stages of a career that would bring him to the pinnacle of Italian business and political power. Volpi was part of a well-connected group of financiers, politicians, and aristocrats, all of whom worked in league with Italy’s largest bank, Banca Commerciale Italiana (BCI).3 He arranged a five-year contract for Nogara to serve as a general manager for a Bulgarian-based mining venture that was planning to expand throughout Asia Minor. In 1907, Volpi tapped Nogara to direct the Constantinople branch of his expanding empire. It was there Nogara learned Turkish and discovered a natural talent for mastering the cutthroat political intrigue that was the hallmark of the Ottoman capital.4 Through his work with Volpi, Pius learned, Nogara earned a reputation for his financial acumen.5
After the Italo-Turkish War—a one-year conflict between Italy and Turkey in 1911 over control of Libya—the Rome Chamber of Commerce selected Nogara as the Italian delegate to the Ottoman Public Debt Council. It was a European-run organization of some five thousand employees whose brief was to pay off the enormous Ottoman Empire debt to Western countries by managing its monopoly and customs revenues in receivership.6
After World War I, Nogara was chosen as the Turkish expert to Italy’s economic delegation at the Versailles Peace Conference, a forum to which the Vatican was denied a role. Nogara impressed his colleagues with his business savvy. Then in 1924, he began a five-year stint in charge of the industry division of the Inter-Allied Commission responsible for rebuilding war-ravaged Germany. There he met many of the same men who now urged the Vatican to hire him to handle the Lateran settlement and remake the church’s finances.7
God's Bankers: A History of Money and Power at the Vatican Page 7