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There’s No Business Like Vatican Business VIII

THE TALE OF the eel that one day left its home in Lake Bracciano, some fifty miles outside Rome, and swam all the way to Vatican City to make an unscheduled “appearance” underneath the Pope’s window has every earmark of a fish story—and yet it happened.

The eel, in swimming around the bottom of the lake, apparently slithered into a cement water pipe. At a point forty-six miles from where the fish started, the main forked off in two directions—one way went to Rome, and the other to Vatican City. Bearing to the right, the eel took the way that led to the Vatican. After passing another underground junction, the eel slipped into a drain and managed to get itself stuck inside one of the two famed fountains in St. Peter’s Square, just below the papal chambers.

The eel was blocking off the fountain’s water. But the irreverent creature would not have made its mark on Vatican history if it hadn’t been for Pope Pius XII, who had just finished shaving when he glanced out the window and noticed to his bewilderment that there was no water in the fountain. At breakfast he commented to his housekeeper on how odd it was that there was water gushing from the far fountain but not from “our fountain.”

Sister Pasqualina picked up the phone and called the fire department. The firemen arrived, as did some newspapermen, and when the fountain’s innards were examined, the eel was found. When it was removed from the tiny pipe in which it was lodged, the fountain came to life again. The eel was carried away in a pail.

A few days later, a newspaper reporter asked what had become of the eel. Since the Vatican ignores all such questions, cynical Romans provided their own answer. The Vatican, they claimed, had taken the eel to one of Rome’s many outdoor fishmarkets, and sold it—which, they said, put the Pope in the fish business as well as every other.

What actually happened to the aquatic intruder is, of course, not known. But the story does indicate what Italian skeptics think about the Vatican and its business interests. According to these cynics, the Vatican is involved in so many business enterprises that even the selling of fish would not be beneath its dignity. As far as anyone knows for sure, the Vatican is not presently in competition with Rome’s outdoor fishmongers. But many Romans are inclined to believe some of the Vatican’s financial operations do have a fishy odor about them.

So widespread and complex are the Vatican’s moneymaking enterprises, that it is almost impossible to get a clear picture of all of them.

In the last chapter we described Vatican participation in the building and construction industry through the Societa Generale Immobiliare. In this chapter we will try to trace the Vatican’s participation in manufacturing, energy, communications, banking, insurance, and other fields. The reader is asked to take a deep breath before entering the maze.

There is hardly a sector of Italy’s economy in which the Vatican’s “men of trust” are not representing the Church’s interests. Almost all of these men hold high positions in companies in which the Church is financially involved. They hold their responsible posts year in and year out, sometimes on the basis of the percentage of profit that the Holy See realizes on its investment.

For many years, Bernardino Nogara served on the board of directors of the Montecatini Company (now Montecatini Edison). Let us take a look at this company. One of the largest corporations in Italy, and indeed, in the world, it deals in mining and metallurgical products, fertilizers, synthetic resins, textile fibers, and pharmaceuticals as well as electric power—and it is bound to the Vatican with hoops of steel. The extent of Vatican participation in this major corporation is not known; probably the Vatican does not have a majority holding, but its interest is substantial indeed. Since the death of Nogara, several Vatican watchdogs have replaced him on the company’s board and take part in all the important decisions, such as that in 1966 to merge Montecatini and the Edison Company. For that year of the merger Montecatini Edison reported total sales of $683.9 million and a net profit of $62.6 million. The 1967 report and balance sheet showed substantial boosts in nearly all sectors of the company’s activities, with total sales having jumped to $854 million and the net profit to $66.1 million. Monte-catini’s investments in other companies amount to over $942 million, its real estate holdings to better than $22 million, and its industrial plants to approximately $1.3 billion.

Montecatini Edison has a number of foreign associate companies, all of which are doing well. The Novamont Corporation at Neal, West Virginia, is doubling its production capacity to take advantage of the expanding polypropylene market in the United States. In Holland, the Compagnie Neerlandaise de L’Azote recently modernized its plant at Sluiskil and increased its daily production to one thousand tons of ammonia and two thousand tons of nitrogenous fertilizers; it also began construction of a new plant that will produce six hundred tons of urea a day. In Spain, Paular, S.A., in which Montecatini Edison has a joint holding, completed a new factory at Puerto- llano for the manufacture of polypropylene and polypropylene products. The Madras Aluminum Company of India expects to increase its production of alumina to fifty thousand tons a year and that of aluminum to twenty-five thousand tons a year. The continually expanding Brazilian Heliogas group recently acquired 140,000 new users and has increased its annual sales of liquid gas to about one hundred sixty thousand tons. And Panedile Argentina during 1967 brought its work on the damming of the Rio Hondo and the construction of a hydroelectric power station at Ullun to completion.

In Italy, Montecatini Edison owns or controls nineteen companies. These include Societa Orobia, Mineraria Prealpina, Miniere di Ravi, Sorap-Societa Raffinazione Petroli, Miana Serraglia, Ascona, Clio, Fortuna, Hermes, Immobiliare Capricorno, Melide, Parnaso, Ribolla, Sant- Agostino and Societa Mineraria Presolana, all of Milan; and Cieli and Societa Imprese Elettriche Scrivia, both of Genoa; Societa Emiliana di Esercizi Elettrici of Parma; and Resia of Casoria.

Now in its second century of existence, Italcementi— which came under Vatican control after the war and is run by papal “agent” Carlo Pesenti—accounts for 32 percent of the total cement production of Italy; it is the world’s fifth largest producer of cement and the second largest in Europe. In 1967, Italcementi, which employs over 6,500 workers, reported a net profit of $5.5 million, and it produced more than twenty-six million tons. The company, which has its headquarters in Bergamo, has a capital of $51.2 million. Because of a crisis in Italy’s building industry in the last few years, Italcementi’s profits had somewhat decreased (they were over $4.2 million in 1965, and not quite $4 million in 1966). The company had taken the decrease more or less in its stride, and according to Massimo Spada (speaking for the board of directors), expects to show up even stronger in 1969 and 1970 when construction picks up again. Thus, Italcementi recently built and put into operation a new cement plant near Brescia. The plant, which covers an area of over two million square feet, produces six hundred thousand tons of cement a year. Much of this is a new white cement known as Supercemento Italbianco which is quick drying and highly resistant to breakage.

The SNIA-Viscosa Company of Milan, which produces more than 70 percent of Italy’s artificial and synthetic textile fibers, is known to be maneuvered by Vatican financiers. It is not owned by the Vatican. It is, however, tied to the CISA-Viscosa Company, which produces viscose fibers and rayon, and to the Saici Company, which manufactures cellulose—and both of these companies are owned by the Vatican. Also, SNIA-Viscosa holds considerable stock in a cotton plant, Cotonificio Veneziano, which is a Vatican-controlled company. SNIA-Viscosa, which has a capital of $89.6 million, has among its shareholders the British textile group Courtaulds, and it owns two profitable textile companies in Spain, two in Brazil, two in Mexico, and one each in India, Argentina, and Luxembourg. The Vatican is a heavy stockholder in these foreign companies, and in two instances holds the controlling shares. For 1966, when it showed a net profit of over $9.7 million, SNIA-Viscosa declared a dividend of 130 lire on each of its 46,703,125 shares. In 1967 when profits dipped substantially to only $310,000, the company nevertheless declared the same dividend of 130 lire but asked its stockholders to take into consideration the advisability of a merger with one of several possible companies that would provide diversification—now perhaps the most holy of words in Vatican business strategy.

One of the Vatican’s biggest companies, Manifattura Ceramica Pozzi, which makes sinks, wash basins, toilet bowls, bidets, and other bathroom fixtures, has been in difficult straits during the last six years, reporting substantial losses each time. At the end of 1967, Pozzi came up with its smallest loss in recent years, $2 million. Adding that to the $11.9 million that Pozzi had dropped during the previous five years, the company’s total deficits now have reached the sum of nearly $14 million. Thus it came as no surprise during 1968 when the Vatican sent in one of its ace troubleshooters, Count Enrico Galeazzi, to sit in on the board of directors as vice president.

With its capital listed at $36.96 million, Pozzi is nevertheless on a solid footing in Italy’s economy. By diversifying into refractory materials, paints, plastics, and chemicals, the company—which is one of the oldest in Italy—is reorganizing its operation. During 1967 it completed the construction of a hygienic-sanitary fixtures plant for the Hungarian government and put into operation a new plant at Bizerte for Tunisia.

In addition to constructing the factories, the Pozzi firm trained personnel for them. Pozzi owns 90 percent of a company in France and 13 1/3 percent of another company in Brazil, both of which have shown profits in the last two years. In Milan the Pozzi company holds 100 percent of the stock in the new Pozzi Ferrandina chemical plant, which went into operation in June 1967 with a capital of $18.1 million. With Count Galeazzi now bringing in his know-how, Pozzi officials expect to get back into the black again within a few years by escalating the $43 million export level of previous years.

One of the most ramified, fully Vatican-owned companies is Italgas, which has its main office in Turin. With a capital of almost $59.9 million, Italgas controls gas companies in thirty-six Italian cities, including Rome, Turin, Florence, and Venice. During the fiscal year 1967-8 it supplied 679 million cubic meters of home fuel to its customers and reported a profit of nearly $3.5 million.

Trending upward for over two decades, Italgas also controls a number of companies that are related to the gas industry. The Cledca Company (tar), Iclo (anhydrides), Funivie Savona San Giuseppe (iron ore and phosphorus), Fornicoke (coke for steel mills), Pontile San Raffaele (coke), Cokitalia (distillates), Societa Acque Potabili di Torino (drinking water), Carbonifera Chia-pello (real estate heating plants), Propaganda Gas (gas stoves), Urbegas (gas appliances), and La S.p.A. Forni ed Impianti Industriali Ingg. De Bartolomeis di Milano (industrial ovens). Of the last-named company, Italgas owns only

20.29 percent of the stock. Not long ago I happened to mention to an American visitor that the Vatican owned a spaghetti factory in Rome. My pun-loving friend immediately said, “The Vatican is getting rich making all that dough!”

Molini e Pastificio Pantanella, S.p.A., is a fully Vatican- owned company that packages various types of pasta. As a profitable sideline, Pantanella also produces panet-tone holiday cakes and an assortment of fifty-two different types of cookies. Backed by assets listed at $16.3 million, Pantanella reported a net profit of $290,562 for 1966 but broke even in 1967. The company would have done better, according to board director Marcantonio Pacelli, if it had not been for government-imposed regulations in July 1967, which not only placed cumbersome restrictions on the country’s spaghetti factories but also controlled the price of soft and hard grains. But, as my friend might say, the Vatican is not at a loss for “grain” (Italian slang for money), for it owns outright, controls, or influences by its substantial though minority holdings all of the following companies which, according to the most recent financial statements, are in the black:

Societa Mineraria del Trasimeno (mining—capital: $3.2 million), LTstituto Farmacologico Serona (pharmaceuticals— capital: $1.4 million), La Societa Dinamite (dynamite and ammunition—capital: $624,000), La Torcitura di Vittorio Veneto (yarn—capital: $800,000), Fisac-Fabbriche Italiane Seterie Affini Como (silk—capital: $3.4 million), Concerie Italiane Riunite di Torino (furs—capital: $4 million), Zuccherificio di Avezzano (sugar—capital: $1.6 million), Cartiere Burgo (paper products—capital: $23.2 million), Industria Libraria Tipografica Editrice di Torino (publishing—capital: $1.6 million), and Sansoni di Firenze (publishing—capital: $1.08 million).

The following companies, with which the Vatican has a financial association of either major or minor degree, report a year-end loss or no profit as of this writing: Societa Santa Barbara (mining—capital: $4.8 million), Caffaro Societa per l’Industria ed Elettronica (chemistry and electronics—capital: $9.6 million), La Salifera Siciliana (salt—capital: $1.1 million), La Societa Prodotti Chimici Superfosfati (chemicals—capital: $244,800), Bottonificio Fossanese (buttons—capital: $480,000), Saici Societa Agricola Industriale per la Cellulosa Italiana (cellulose —capital: $24 million), Cotonificio Veneziano (cotton— capital: $3.2 million), Lanificio di Gavardo (wool—capital: $1.4 million), Fabbriche Formenti (textiles—capital: $104,000 [reduced from $1.04 million]), Sacit (readyto- wear clothing—capital: $256,000), Molini Antonio Biondi di Firenze (spaghetti—capital: $960,000), C.I.T. (travel and tourism—capital: $800,000), and C.I.M. (department stores—capital: $1.2million).

So much for private enterprise.

The question now arises, Does the Vatican have a stake in operations run by the state? The answer, not surprisingly, is in the affirmative. Let’s look at another aspect, unique by American standards, of the Italian economy— that of the state as a rival and competitor of private entrepreneurs.

In the postwar period Italy’s pell-mell economic expansion has had, at times, to walk a tightrope. Coming out of its catastrophic fascist cocoon, the Boot’s economy went from rags to Vespas to Fiats—thanks in no small part to the heavy investments of the Vatican. Italy’s gross national product pole-vaulted 143 percent in the period between 1953 and 1963 to $45.1 billion. Last year the G.N.P. reached over $66 billion at constant prices and was expected by the end of 1968 to boost itself an other 5.5 percent to over $70 billion. To understand how Vatican money has benefited the Italian economy, one must understand the structure and function of Italy’s Istituto di Ricostruzione Industriale. I.R.I., as it is affectionately known, is a public law corporation to which the Italian government assigns specific entrepreneurial functions. I.R.I. controls 130 firms, each of which is a share company that is run by the same rules as any private company in Italy.

What makes I.R.I. unique is that it has brought under government domination a vast complex of industries— and these include not only television and radio, railroads, airlines, and shipping, but also industries like steel, automobile manufacturing, and banking. I.R.I., which is therefore in competition with private industry, has over three hundred thousand people on its payroll. Its rate of investment is equivalent to nearly $3 million a day; its annual turnover, almost $3 billion; and the value of its industrial complex, about $12 billion.

Established in 1933, after the 1929 Wall Street crash set off a chain reaction in Europe, I.R.I. had two jobs: (1) to save the Italian banks, which had acquired shares in Italian industries that were in serious difficulty and, for that reason, were unable to guarantee the safety of their clients’ deposits; (2) to put the finances of Italy’s industry in order. It took almost five years to accomplish these tasks. But, in the end, credit was restored, and industry returned to life. The Italian government then took a second look at I.R.I. and, coming to realize that the giant, state-controlled industrial complex had been a daring financial experiment that had succeeded under the most difficult of conditions, decided to make it a permanent institution.

For every lira received from the state, I.R.I. companies have to raise another twelve from private investors. Since none of the I.R.I. companies could possibly finance its operations with its own capital, I.R.I. issues bonds on the open market. To date, nearly a half million Italian investors have put their money into I.R.I.’s issues. The biggest single investor has been the Vatican. There is no way of pinning down how much money the Vatican’s financial advisers have tossed into I.R.I. operations, but the areas into which the Vatican has plunged most heavily are now known. Strictly for the record, let it be stated that in no case has the Vatican managed to become a majority shareholder in an I.R.I. company, despite the fact that in certain companies it is the largest single investor. It must be remembered, however, that since the Vatican’s political party (the Christian Democrats) has been in control of the Italian government for over twenty years, the moving parts of the Italian state and its I.R.I. operation are well lubricated by Church money.

Critics of I.R.I. have accused it of being one of the main bottlenecks of Italy’s economy. The criticism actually extends beyond I.R.I. to the Italian government and to the Vatican itself. Lack of business confidence during the middle sixties has held down private investment. In fact, in recent years, private companies have only been able to raise very small amounts through stock issues. Today I.R.I. and other government enterprises account for 40 percent of all Italian investments. Private enterprise is keenly aware of the competition. I.R.I. has long maintained, however—and the Vatican has backed it all the way—that it has never kept private industry from doing anything it has wanted to, either by absorbing all available capital or in any other way. But often, where private industry has been reluctant, I.R.I. has not.

I.R.I. has been carrying on a flirtation with U.S. business in recent years. Several of America’s largest industrial concerns are tied in with I.R.I. subsidiaries. The U.S. Steel Corporation holds a 50 percent share in two I.R.I. steel plants. Armco International has a half interest in another. Raytheon and the Vitro Corporation have a stake in two of I.R.I.’s most calculated ventures in electronics. Siderexport, an I.R.I. trading subsidiary, has a 50 percent holding in Dalminter of New York. The Vatican owes its current favorable position in I.R.I. to Bernardino Nogara, who foresaw a high return on the enormous investment he made in the state’s industries. It is said that Nogara was considerably stimulated by the report of the governor of the Banca d’Italia at the end of the war. The report included the words, “We have reached a turning point. There is an arduous and fatiguing road that goes upward, and another, flat and easy, which leads to ruin.”

Bewildered as Italy may have been by the extensive destruction of its factories and other industrial installations, Nogara’s sights were clear. Italy would have to choose the first road and start on reconstruction immediately. What better place to invest the Vatican’s money than the government’s Finsider steel group? Although its plants were smouldering in ruins, Finsider gave promise of exceptional development once a rebuilding program was under way.

At the beginning of the postwar period, Finsider had an annual output of less than a million tons of steel. Today it produces ten million tons a year. By contributing decisively to making Italy self-sufficient as far as iron and steel requirements are concerned, Finsider has made an essential contribution to Italy’s development, and has become one of the pillars of the nation’s economy. With over 76,000 employees, and with an annual payroll of over $285 million, the company reports an annual profit of more than $24.1 million.

Finsider’s objectives were given effective stimulus when the European Coal and Steel Community was set up. The Vatican and the Christian Democratic party both recognized the advantages to be gained by joining this organization. By putting an end to the protectionism that had characterized Italy’s steel industry, the country entered into direct competition with the biggest steelmakers in the world, and is now the world’s seventh largest steel producer.

Finsider’s great strength today comes through its ownership of subsidiary companies. It owns, for instance, 51.6 percent of the Italsider Company, which produces pig iron, steel ingots, hot and cold rolled products, and welded pipes. Finsider is also a majority shareholder in the Dal- mine Company, which specializes in steel ingots and seamless and welded pipes. Ninety-seven percent of the Terni Company stock is held by Finsider. Terni produces steel ingots, hot and cold rolled products, castings, forgings, and drop forgings. In addition, Finsider holds full or controlling interests in some twenty other connected or related companies.

The greatest amount of Vatican money in any I.R.I. company is probably in the Alfa Romeo automobile company (capital: $72 million). Italy’s second largest producer of motorcars, Alfa Romeo makes about seventy-five thousand vehicles a year; by 1971, with the help of a new $500 million complex at Naples, it hopes to be producing more than a quarter of a million cars annually. Alfa Sud, the new plant in Italy’s southland, had been a point of contention between Fiat, which controls about three fourths of the Italian car market, and I.R.I. It pitted Fiat president Gianni Agnelli squarely against I.R.I., the Italian government, the Christian Democratic party, and the Vatican, which are jointly trying to encourage the building of new industrial plants in Italy’s depressed economic regions. Fiat termed the Alfa Sud factory “an economic error.” Instead of putting up a new auto plant at Naples, Agnelli said, Alfa Romeo and its parents (I.R.I. and the Vatican) should join Fiat in other undertakings, such as building up an aircraft industry. The major growth phase of the European auto market was coming to an end, he argued, and there would be danger of overproduction in the nineteen-seventies. Agnelli lost his war.

Although the Vatican’s biggest I.R.I. investment may be in Alfa Romeo, a considerable amount of papal money is also at work in Finmeccanica, the I.R.I. holding company that coordinates and finances I.R.I.’s engineering activities. There are thirty-five companies in Finmeccanica. In addition, Finmeccanica has a minority participation in thirty-two other companies, whose activities are ancillary; the Vatican holds the controlling interest in a few of these.

With all its affiliated companies, Finmeccanica is the biggest industrial concern in Italy, operating in almost every branch of the engineering industry—automotive and electrical engineering, electronics, design of aircraft and of railway cars, of heavy machine tools and of precision instruments, of heating equipment and of modern armaments (especially armored vehicles and tanks). Aided by heavy Vatican investments, the Finmeccanica group has shown remarkable progress since 1959, when its annual profits began to rise from $185.6 million to the present- day figure of over $420 million (and its exports from $41.6 million a year to nearly $100 million).

Vatican money has also found its way into Finmare, another I.R.I. holding company, which is responsible for the country’s most important passenger shipping lines (like the well-known Italian Line, and the Lloyd Tries-tino, Adriatica, and Tirrenia lines). With its ancient seafaring tradition and large tourist industry, Italy has never undervalued the importance of its ships. Accounting for almost 70 percent of the nation’s passenger service, Fin- mare ships rank second in the number of passengers carried on the European-North American run and first on the South American route. With a capital of $28.8 million, Finmare, which has over ninety ships, totaling more than 700,000 tons, transports nearly two million passengers annually and carries more than 1.9 million tons of freight a year; the gross income is approximately $150 million per year. The Finmare-controlled Italian line has two ships, the 45,933-ton Raffaello and the 45,911-ton Michelangelo, crossing the Atlantic between North America and Europe, and it is certain that Vatican funds went into the total amount of money needed to finance the construction of these two luxurious liners.

The extent of the Vatican’s investment in and control of Italy’s main telephone company cannot be accurately ascertained, but it is safe to say that both are considerable and that Vatican influence has made S.T.E.T. (Societa Finanziaria Telefonica) the respected and solid organization it is. At its last stockholders’ meeting in July 1968,

S.T.E.T. closed out its books with a declared net profit of $20 million for the second year in a row. Having recently increased its capital by $16 million, S.T.E.T. today is worth $304 million. With more than six million telephones, double the number in operation in 1958,

S.T.E.T. today employs fifty-eight thousand persons. By 1970 it expects to have invested a total of $1.12 billion in new facilities and equipment and to have increased the number of its employees to sixty-eight thousand. S.T.E.T. has also managed to spread itself into other companies. It is the sole or majority stockholder in many of these. In SIP-Societa Italiana per l’Esercizio Telefonico (telecommunications), it holds 53 percent of the shares; in Societa Italiana Telecommunicazioni Siemens, 98 percent of the shares; in Italcable (cables and telegrams), 60 percent of the shares; in SETA-Societa Esercizi Tele-fonici Ausiliari, 99.99 percent of the shares; in FONIT-CETRA (phonograph records), 99.99 percent of the shares; in EMSA-Societa Immobiliare per Azione, 52 percent of the shares; in SAIAT-Societa Attivita Immo-biliari Ausiliarie Telefoniche, 100 percent of the shares; in CSELT-Centro Studi e Laboratori Telecommunicazioni, 100 percent of the shares; in SAGAS-Societa per Azione Grandi Alberghi e Stazioni Climatiche, 100 percent of the shares; in SEAT- Societa Elechin, Ufficiali degli Abbonati al Telefono, 100 percent of the shares. The S.T.E.T. group is also a minority stockholder in RAI-Radiotelevisione Italiana (22.9 percent), Telespazio (33.33 percent), Ates-Componenti Elettronici (20 percent), SIRTI-Societa Italiana Reti Telefoniche Interur-bane (10 percent), GE MI NA Geomineraria Nazionale (33.33 percent), SIEO-Societa Imprese Elettriche d’Ol-tremare (11.09 percent), and SAGAT-Societa Azionaria Gestione Aeroporto Torino (4.5 percent).

The Vatican is also involved in Italian banking. The country’s three leading banks—Banca Commerciale Italiana, Credito Italiano, and the Banco di Roma—though belonging to the I.R.I. group, are closely tied to the Vatican. Together with a Vatican-owned bank, the Banco di Santo Spirito, they hold more than 20 percent of all bank deposits in Italy, have financed 50 percent of all foreign trade transactions, and placed two thirds of the new share and bond issues on the Italian stock exchange.

Two years ago, the Banca Commerciale Italiana, Credito Italiano, and the Banco di Roma decided to double their capital, by issuing shares against new money, so as to improve the ratio between their own resources and deposits. In the case of the Banca Commerciale Italiana, this raised the capital from $32 million to $64 million; in the case of Credito Italiano, from $24 million to $48 million; and in the case of the Banco di Roma, from $20 million to $40 million. In the last few years the time deposits and clients’ current accounts of these three banks rose by hundreds of millions of dollars to a total that surpasses $6 billion (nearly 20 percent of the national total).

As for the Banco di Santo Spirito, which was founded by Pope Paul V in 1605, and which is one of the oldest banks in the world, its social capital is set at $12.8 million. From a 1966 total of $667 million, the bank hiked its total deposits last year to $729 million and reported a net profit for 1967 of $1.24 million, an increase of $226,000 over the previous year.

Although the four aforementioned banks have their main offices in Rome, the Vatican’s real banking strength lies in the north of Italy. Cumulatively the Vatican’s northern banks—particularly in the provinces of Lombardy, Veneto, and Emilia—are in even better health than the thriving four in the Eternal City. Foremost of these banks in the thigh part of the Boot is the Banco Ambrosiano in Milan, which was founded in 1896 and has a capital of $6.24 million. At the end of 1967 the Banco Ambrosiano reported a net profit of $1.4 million, which was virtually the same amount (give or take pennies) it had declared for the preceding period, and paid a dividend of 220 lire for a total of $1,056 million on three million shares, a repeat of the previous year.

The Banco Ambrosiano recently bought interests in three foreign fiscal organizations—the Banca del Gottardo di Lugano (Switzerland), the Kredietbank S.A. Luxembourgeoise (Luxembourg), and Interitalia (Luxembourg). Because the Italian parliament has not at this writing passed a bill to set up Italian investment funds (one such bill was introduced in 1964), the aforementioned Vatican- controlled fiscal societies have been providing a service whereby Italians can acquire shares of foreign mutual funds. At the end of 1967, foreign mutual funds from Italian investors through over-the-border holding companies totaled close to $4.5 million. Now two more Vatican- owned banking organizations—the La Centrale holding company and the Banca Provinciale Lombarda—have joined the lucrative business of purchasing shares from foreign investment trusts in the Swiss and Luxembourg markets. In addition, the Banca Provinciale Lombarda has recently joined with the Dutch Robeco and the German Concentra investment trusts to help Italians acquire shares of foreign mutual funds. Until a common invest- ment-fund law is passed by the government, the foreign companies tied to the Vatican banks and investment companies will continue to operate profitably on the Italian market.

The Vatican’s northern banking affairs have become so intricate today that it’s almost impossible to explore their many ramifications. In an effort to provide some kind of clarity, we will not refer to those banks that have a capital of less than $80,000, and we’ll divide the others into three categories. In the first are seven large banks that are owned outright by the Vatican: the Banco Ambrosiano of Milan, the Banca Provinciale Lombarda, Piccolo Credito Bergamasco, Credito Romagnolo, Banca Cattolica del Veneto, Banco di San Geminiano e San Prospero, and Banca San Paolo. In the second category are thirteen banks in which the Church holds a heavy interest but not necessarily a controlling one: the Banca Nazionale dell’Agricoltura, Banca di Credito e Risparmio di Roma, Banca Popolare di Bergamo, Banca Piemonte di Torino, Banca del Fucino di Roma, Banca Romana, Banca Torinese Balbis e Guglielmone, Banca dei Comuni Vesuviani, Istituto Bancario Romano, Banca di Trento e Bolzano, Credito Mobiliare Fiorentino, Banca del Sud, and Credito Commerciale di Cremona. In the third category are sixty-two banks in which, although the Vatican interest is minimal, that interest is protected by one or more Vatican agents on the board or at the policy-making level; among the bigger banks in this category are the Banca Popolare Cooperative di Novara, Credito Varesino, Credito di Venezia e del Rio de La Plata, the Banca Agricola Milanese, the Banca Toscana, the Banca Popolare di Milano, the Banca Emiliana, the Banco di Chiavari e della Riviera Ligure, Credito Bresciano, and the Banca Popolare di Verona.

Finally, it must be mentioned that thousands and thousands of small rural banks spread all over Italy are owned 100 percent either by the Vatican or by the local parish church, which submits to Vatican controls and regular audits by a peripatetic Vatican financier. Many of these small banks are located in the south and on Italy’s two major Mediterranean islands, Sicily and Sardinia. As far as is known, the Vatican has control of only two large banks in this area—the Banco di Napoli and the Banco di Sicilia.

During 1967 eight banks bought by Italmobiliare, a financial institution owned by the Vatican’s Italcementi cement company, merged to give life to a new Istituto Bancario Italiano (I.B.I.). Italmobiliare, claiming reserves of close to $9 million and showing a 1967-8 profit of $642,000, is headed by Carlo Pesenti—sometimes viewed as Italy’s most knowledgeable banker, and certainly one of the Vatican’s most trusted captains in the field. Serving also as Director General of Italcementi, Pesenti bought the banks for Italmobiliare one at a time over a five-year period. In what some consider one of the most brilliant financial maneuvers in Italy’s dopoguerra economic history, Pesenti almost singlehandedly created the Istituto Bancario Italiano by having the Credito di Venezia e del Rio de La Plata (which he had acquired)—its capital is listed at $4.8 million—incorporate Pesenti’s other seven banks—namely, Banca Torinese Balbis e Guglielmone (capital: $2.4 million), Banca di Credito e Risparmio di Roma (capital: $2.4 million), Istituto Bancario Romano (capital: $800,000), Banca di Credito Genovese (capital: $1.12 million), Banca Romana (capital: $2.4 million), Credito Mobiliare Fiorentino (capital: $1.12 million), and Banca Naef-Ferrazzi-Longhi of La Spezia (capital: $640,000). Ranking among the first twenty in the fist of Italian banking institutions, thanks to cumulative deposits surpassing $512 million and a capital and reserve sum of $22 million, the new I.B.I. made quite an impact for an “infant” by reporting a profit of $800,000 during its first year of operation (1967).

Pesenti, who has control over two other important banking establishments (the Banca Provinciale Lombarda and the Credito Commerciale di Cremona) is serving as president of the newly founded bank, while Massimo Spada takes on the duties of vice president. The creation of I.B.I. will be only the first in a complex series of mergers of Vatican banks. The next merger will be that of the Banca Provinciale Lombarda and the Credito Commerciale di Cremona; it will result in the creation of a banking combine that will have over $1.28 billion in deposits—making it the largest private banking concern in Italy and one of the largest in all Europe, including Switzerland.

Vatican banking, however, is not confined to Italy. Funds managed by the Vatican’s Prefecture of Economic Affairs are deposited in numerous non-Italian banks. Some are in America, and many are in Switzerland, where the Vatican maintains its funds in numbered accounts. Nobody really knows how much money the Vatican has in Swiss vaults. But it is known that one reason why the Vatican likes to bank in Switzerland is because the Swiss franc can provide protection against inflation and devaluation of money in other countries. Since 1945, there have been more than 170 currency devaluations all over the world—twelve of them in Brazil alone. Unlike the American dollar or the British pound, which have substantially less than 50 percent backing in gold reserves, the Swiss franc is guaranteed up to 130 percent by gold. So, because Switzerland’s money is “hard money,” the Vatican holds the francs and exchanges them for the legal tender of another country when needed.

The Vatican also uses its Swiss accounts to maintain its anonymity when gaining control of foreign corporations. Swiss banks, unlike American banks, can act as stockbrokers; they hold large numbers of shares belonging to clients but not in the clients’ names. The Vatican, like any other depositor, can have a Swiss bank buy shares in a company in the bank’s name and can thus obtain control of the company in full anonymity. The “Gnomes of Zurich”—a pet name pinned on Swiss banking officials by the British—point out, however, that the total number of shares their banks hold in U.S. companies is less than 1 percent of America’s outstanding stock. Any speculation about how much the Vatican may have silently invested in the U.S. economy, at least at the corporation level, must take this figure into account.

Since Helvetian banking practices are based on secrecy, a style to which Vatican financiers are indeed no strangers, the Vatican and I.R.I., acting as major shareholders, operate the Banque de Rome Suisse, a Swiss offshoot of the Banco di Roma. This bank lists a $15.2 million capital stock; subject to Swiss laws, it keeps the names of its depositors clad in the impenetrable armor of legality.

A significant part of the Vatican’s calculated diversification program is concerned with the rarely publicized activities of its various special credit institutes. The precise determination of the Vatican’s stake in Italy’s credit system would require an enormous amount of time and digging. But it can be calculated that of the some 180 medium- and long-term special credit institutions operating in Italy, at least a third are fed by Vatican money.

It should be noted that long-term loans constitute a highly important source of financing for expansion programs, and in this respect Vatican money has done much to shore up small and medium-sized businesses, which have the greatest difficulty in raising funds directly on the financial market, and has served the cause of a balanced growth of Italy’s postwar economy. In this connection, mention should be made, albeit briefly, of two important aspects of this activity: (1) the significant financial support the Vatican’s special credit institutes have been extending, particularly in recent years, to the process of industrialization in the depressed southland, and (2) the considerable assistance the Vatican’s credit program is providing for the penetration of Italian industries into foreign markets.

The special credit institutes extend medium- and long- term credit. Each serves a particular sector of the economy, providing credit for industry, for example, or for public utilities companies or real estate companies or farmers or motion picture producers. Some of these institutes operate on a national scale, while others are limited to individual regions; some extend both medium- and long-term credit, while others specialize in medium-term transactions. Together with Italy’s banks, the special credit institutes are the major source of new capital, and they provide most of the loans and the capital for the acquisition of securities.

One of the largest of these financial societies is La Centrale. Just what percentage the Vatican has of the equity of La Centrale is not known. It is known, however, that La Centrale is wedded to the Pirelli rubber company, which no doubt exercises direct controls over the agency. Just how much influence the Vatican has on its operations has not yet been made clear, though its control is widely accepted in the Italian business community.

The area in which La Centrale has been most prominently engaged is that of electric power, but since the time the Italian government nationalized the power companies, La Centrale has successfully sought to shift its strength into agriculture, mining, engineering, and trade organizations, both in Italy and abroad. Today its capital totals $107.3 million. La Centrale’s assets are $276.8 million, of which $116.16 million are invested in the shares of some fifty-five companies and almost $60 million are out in loans to these companies. In addition, $156 million have been extended in credits to E.N.E.L., the national electric agency of Italy. La Centrale closed out 1967 showing a net profit of over $16.5 million.

During 1967, the Vatican-controlled Romana Finanziaria Sifir, S.p.A., fused with La Centrale and brought with it a stock capital of $72 million. Sifir’s total assets were $168 million, of which $17.6 million were invested in the shares of thirty-six other companies and $22.4 million were out in loans to these organizations. Add to that the $70.4 million that have been extended in credits to E.N.E.L. and one gets a better picture of La Centrale’s new associate.

One credit institution that is owned fully and outright by the Vatican is the Societa Finanziaria Industriale e Commerciale, with a capital of $480,000. Other special credit institutes owned partially or controlled by the Vatican are La Societa Capitolina Finanziaria (capital: $400,000), Credito Fondiario (capital: $16 million), Societa Mineraria del Predil (capital: $384,000), Il Finanziario Investimento Piemonte (capital: $182,800), Societa Finanziaria Italiana di Milano (capital: $400,

000), Fiscambi di Roma e di Milano (capital: $1.6 million), Efibanca-L’Ente Finanziario Interbancario (capital: $16 million), and La Sind di Milano (capital: $1.6 million).

A number of insurance companies are Vatican owned; others are merely controlled by the apostolic financiers. Two important companies that fall into the former group are the Assicurazioni Generali di Trieste e Venezia (capital: $23.2 million), which turned a profit in 1967 of over $4.67 million, and the Riunione Adriatica di Sicurta (capital: $6.9 million), which reported a profit of better than $1.27 million. Tied to the Banca Commerciale Italiana (which the Vatican controls), Assicurazioni Generali has a large portfolio of shares in Montecatini Edison, while Montecatini Edison has a large portfolio of shares in Assicurazioni Generali. Similarly, the Riunione Adriatica di Sicurta, which is tied to the Credito Italiano bank (under Vatican control), has a working relationship with the La Centrale and Bastogi special investment institutes, both of which are under Vatican influence, and works closely with the Vatican’s Italcementi cement company.

In violation of Italian laws, which prohibit members of the country’s parliament from having business ties with any commercial enterprise, four senators (all Christian Democrats), one of whom was a minister several times, are on the board of directors of Assicurazioni Generali. Far from being unduly disturbed by this, the company and its associate Riunione Adriatica di Sicurta have calmly conducted their affairs, and have done well. Over the years, they have profited from large insurance contracts involving government industries that deal in foreign trade, from indemnification against damage by nuclear bombardment and losses due to foreign nationalizations and confiscations of industries, and from various insurance programs written, with close state cooperation, for customers abroad. Over the years, Assicurazioni Generali and Riunione Adriatica, two companies that apparently do not see any ethical problems raised by having state officials represent their private interests, have become the two leading insurance companies in Italy.

Following is a list of other Italian insurance companies that are connected with and to the Vatican; in parentheses is each company’s capital.

La Compagnia di Roma, also known as Riassicurazioni e Partecipazioni Assicurative (capital: $960,000); L’Unione Italiana di Riassicurazione (capital: $960,000); Assicurazioni d’ltalia (capital: $2 million); Fiumeter (capital: $1.68 million); Compagnia Tirrena di Capitalizzazioni e Assicurazioni (capital: $2.4 million); L’Unione Finanziaria Italiana (capital: $640,000); Finanziaria Tirrena (capital: $160,000); Lloyd Internazionale (capital: $800,000); Fata-Fondo Assicurativo Tra Agricoltori (capital: $1.2 million).

The foregoing details provide an uncomfortably sharp realization that the Vatican and its men have indeed carved a niche for their firm in the world of big business.

This is no small accomplishment. After years of soul- searching, it has been decided, infallibly, that the accumulation of money is no more reprehensible, no more sinful, than the collecting of coins. True, the Vatican pays ad perpetuum lip service to poverty. But it doesn’t practice it.

The Vatican apparently does not subscribe to the thesis that the enrichment of one man necessarily impoverishes another. Indeed, taken in its proper perspective, the Vatican drive to make money has been highly beneficial to Italy. It has spurred Italy’s material progress and helped the country recover from the battered state it found itself in after the war. It has produced capital for investment. It has generated wealth from which nearly everyone has gained. In a free society, which needs concentrations of private wealth to counterbalance the power of the state, the Vatican—which is no longer seeking territorial aggrandizement— has rendered a service to the theories of capitalism and provided impressive guidelines for those who believe in money and who worship at the altar of big business. The Apostolic Palace and Wall Street are singing a remarkably similar tune.

Because of the secrecy of the Church’s complex business operations, the public image of the Vatican still remains ecclesiastical. The revelation of the Church as a big business often upsets people who should know better. Former Rome correspondent Barrett McGurn once reported the astonishment of U.S. Secretary of Labor James Mitchell after a visit with Pope Pius XII. McGurn interviewed Mitchell immediately after the visit. “The Pope knew all about the International Labor Organization,” Mitchell said, surprised, “and he was already aware that the recession in the United States is over. Why, we’ve just learned that ourselves!”