Saturday, October 29, 2016

Pope rolls the dice on reform blending old guard with new wave (Comment)

Pope rolls the dice on reform blending old guard with new waveReform, as experience teaches, is often a messy process. 

It implies building something new in place of long-established patterns of doing business, which often involves stops and starts, mistakes, disappointments, and the need to back up and start over.

When bottlenecks and breakdowns occur, sometimes the will to change peters out, and the result is a warmed-over version of the same old, same old. 

Other times, however, they’re the prelude to real forward movement.

Time will tell which is the case with Pope Francis’s much-vaunted reform of the Vatican, in particular its financial operations, but earlier this month we got another reminder that his reform is increasingly becoming a blend of the old guard with a new wave.

On Oct. 15, a new deal between the Vatican and the government of Italy went into effect, stipulating that all individuals and entities with accounts at the Institute for the Works of Religion, the so-called “Vatican bank,” which are subject to Italian taxation have until mid-April to report the income earned from their accounts to Italian tax authorities.

The agreement is designed to lay to rest a longstanding source of rumor and gossip in Italy, which is that the Vatican bank is used by fat-cat Italian VIPs to shield their assets from taxation.

As an Italian financier once put it to me, “In this country, the dirty money in the north goes to Switzerland; in the south it goes to Sicily; and in the middle, it goes to the Vatican.” That’s the sort of assumption the new pact aims to make a thing of the past.

To be honest, there’s not much groundbreaking in terms of the content of the deal, which is consistent with the Vatican’s broad thrust to play by the rules of international reporting and transparency ever since emeritus Pope Benedict XVI created a new Financial Information Authority and brought in a world-class anti-money laundering expert, Swiss lawyer and financial intelligence specialist René Brülhart, to head it in 2010.

From a Vatican politics point of view, however, there is something notable about the agreement with Italy, and a point that bears on the course of Francis’s reform.

To wit, it wasn’t the pope’s new Secretariat for the Economy under Australian Cardinal George Pell that prepared the deal and issued the necessary legal changes to implement it, but the Secretariat for State under Italian Cardinal Pietro Parolin.

In the beginning, it wasn’t supposed to be this way.

When Francis brought in the legendarily no-nonsense Pell in February 2014, one of the cornerstones of the reform vision was to be a clear separation of powers between his new secretariat and the Secretariat of State, with the latter being shorn of most responsibility for financial administration.

In part, the idea was that a good share of the Vatican’s financial imbroglios over the years had been related to the Secretariat of State, which by tradition is the 800-pound-gorilla of the place, and that if the pontiff wanted to break the back of the “old guard,” new structures of oversight and control were needed to pull it off.

Almost as soon as Pell started exercising his new powers, there was resistance. Fans of Pell believe it was the empire striking back, meaning stubborn (and possibly corrupt) bureaucrats unwilling to change. Critics say Pell systematically alienated needed allies and had a tendency to leap before looking, issuing new rules and norms which, upon examination, turned out to be flawed.

At the beginning Francis backed Pell, but over the last 18 months or so the tide has definitely been moving in the opposite direction. Increasingly Francis is relying on Parolin as his “Prime Minister,” just as past popes have done, and there’s no recent showdown between the two secretariats in which State hasn’t prevailed.

The story of the Vatican’s on-again, off-again, on-again audit from this past June was a classic case in point.

As a result, it’s now clear that the Secretariat of State is the king of the mountain once again in terms of setting policy, while the Secretariat for the Economy has become essentially a resource center and compliance office.

The take-away for some is that Francis’s reform is in danger of becoming a “back to the future” illusion, essentially a return to the status quo ante.

Others, however, say Francis has reached three realizations over the last 38 months, which are positioning him to deliver a more mature and lasting reform:
  • The Vatican is a sovereign state, not a diocese or a corporation, and practices that work in those environments aren’t always suited for the Holy See. (For instance, corporations routinely rely on external audits, but states tend to use their own public auditing authority.)
  • While the Roman Curia is often caricatured for its supposed incompetence, paralysis and corruption – and God knows, it’s not like those impressions come out of nowhere – there’s still a wealth of experience and living memory there, and just detonating the system and rebuilding from scratch won’t work.
  • In the small world of the Vatican, personnel is policy – no matter what the structures are, the trick is to find people of integrity to make them work. Francis clearly believes he’s found his man in Parolin.
To put things into a soundbite, from this point of view Francis has come to understand that meaningful reform in the Vatican has to be organic rather than revolutionary.

We’ll see how successful this effort turns out to be, including whether future money scandals explode. 

In the meantime, what’s clear is that Francis has rolled the dice on his own model of reform - premised not exactly on a remembrance of things past, but an attempted renewal rather than replacement of them.

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