The arrests over the past six months of Palumbo and the 34-year-old lawyer, Simone Fazzari, highlight one major source of the scandals and power struggles that observers say contributed to Pope Benedict XVI’s historic resignation this week — the murky world of Vatican finances.
With ATMs offering transactions in Latin and a castle-like headquarters protected by spear-toting Swiss Guards, the financial arm of the Vatican has never been a run-of-the-mill bank. But a sense of crisis has been building around it and other Vatican financial dealings.
Last month, Italy barred its own banks from doing business in the Holy See, citing a lack of transparency by the city-state’s financial apparatus that has routinely declined to release data on accounts held there by church bodies, clergy, foreign embassies and lay entities related to the Vatican. The move cut off credit card processing at Vatican commercial sites including the Sistine Chapel, effectively forcing them to go cash-only. This week, plastic was finally welcomed again in Vatican City, but only after church authorities cut a deal with a Swiss firm that is not subject to European Union banking laws.
That followed a series of Italian money-laundering investigations, including one that led to the 2010 seizure of nearly $30 million worth of Vatican Bank holdings kept outside the Holy See.
Evidence suggests the outgoing pope sought to shed light on the dark Vatican books, but that effort yielded even more controversy. The former president of the Vatican Bank, Ettore Gotti Tedeschi, was forced to resign in May, alleging he was fired for getting “too close to the truth.” Last year, other documents leaked by the pope’s butler and other sources revealed the depth of the internal tug of war over financial transparency, with Vatican reformers pitted against traditionalists who appeared to believe the church should answer only to a higher power.
On Friday, the pope backed a decision by a commission of cardinals to name Ernst von Freyberg to head the Vatican Bank. The German-born lawyer and member of the ancient Knights of Malta was selected, the Vatican said, because of “his vast experience.” However, Italian commentators were quick to question why the choice was not left to the incoming pope.
“It seems like an attempt to force the situation, not to leave the new pope an option,” said Massimo Franco, author of “The Crisis of the Vatican Empire” and a columnist at Corriere della Sera. “I find it quite strange that this is the last major act of the pope.”
Vatican officials and the pope have cited age and declining health for the first voluntary resignation of a pontiff in several centuries. But in the end, Vatican observers believe a steady barrage of scandals — not the least of those over financial transparency — took a toll on a formidable theologian, who came to the throne of St. Peter on a mission to reinvigorate the church.“It is very clear that Benedict suffered a lot from the revelations of scandal, from the infighting and intrigue at the Vatican Bank and within the Roman curia,” or the Catholic Church’s governing body, said John Thavis, author of “The Vatican Diaries” and a longtime correspondent for the Catholic News Service. “Did that affect the pope’s decision? A lot of people inside the Vatican believe it did.”