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Vatican City

Chapter · January 2002

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KUZNETSOVA, O. (2002). Vatican City. In S.Pendergast and T.Pendergast (Eds). Worldmark
Encyclopedia of National Economies. Farmington Hills, MI (USA): Gale Group.

Vatican City

1. Country Name

Vatican City

Conventional long form: The Holy See (State of the Vatican City).

Conventional short form: Holy See (Vatican City).

Local long form: La Santa Sede (Stato della Cittá del Vaticano).

Local short form: Santa Sede (Cittá del Vaticano).

See (Old French sied, Latin sedes), historically a seat, especially a throne. The term now

designates the center of a bishop's authority, usually named after some town or city. A See may

be residential or titular. The term Holy (or Apostolic) See denotes the aggregation of the

authority, jurisdiction, and sovereignty exercised by the Pope and his counselors (the complex

bureaucracy that assists him) to direct the worldwide Roman Catholic (RC) Church. Holy See

constitutes the worldwide administrative and legislative body of the RC Church.

As the "central government" of the RC Church the Holy See has a legal personality that allows

it to enter into treaties as the juridical equal of a state and to send and receive diplomatic

representatives.

The Vatican City is a state that provides the Holy See and its central institutions with sovereign

territory from which they may operate independently of any other national state.

2. Capital

Vatican City
3. Location and Size

Vatican City is the world's smallest fully independent state. The size and

the location of the country and its capital and the only city coincide.

Outside the Vatican City there are 13 buildings in Rome and Castel

Gandolfo (the Pope's summer residence). The rights and legislation of the

Vatican City State are extended over these properties making them in legal

terms a part of Vatican rather than Italy. The state is landlocked. It is

situated in Southern Europe as an enclave within Rome, the capital of Italy.

It occupies the total area of 0.44 sq. km (0.169884 sq. miles) on the west

bank of the Tiber River. In comparative terms it is about 0.7 times the size

of The Mall in Washington, DC. The length of the country’s border formed

by medieval and Renaissance walls, except on the south-east in St Peter's

Square (Piazza San Pietro), totals 3.2 km. Italy is the only bordering

country. The terrain is low hill with the elevation extremes of 19 m in the

lowest point and 75 m in the highest point. All the territory is used as an

urban area.

4. Population

The population of Vatican City is relatively stable. It is estimated at 880

(July 2000). The population growth rate is estimated at 1.15%. The birth

rate is extremely low due to the fact that the families are mostly made up of

elderly servants, elderly officers or officials, whose children have grown

up and left the Vatican. Overall most major provisos normally included in

the population statistics are not applicable to the Vatican City because of

its size and political regime. One of the difficulties is related to the

principle of nationality. There is no mention of nationality in the

constitutional law of the Vatican City but the state is able to confer its

citizenship to individuals on the basis of a legal bond between the

individual and the state. Citizenship can be acquired through stable

residence and holding an office or job in the Vatican City. Immediate

relatives, such as wives and children, can gain residence only by

authorization. Citizenship is terminated when the conditions for its

acquisition are no longer fulfilled. As a matter of fact most people who live

and work in the Vatican City retain their original nationality while

becoming the Vatican citizens for the period of their employment. Thus, its

population includes Swiss Guards, all German-speaking Swiss nationals,

as the official language of the papal guard is German.

The citizenship of the Vatican City, as numerous other aspects of this state,

has many paradoxes. For example there are fewer holders of Vatican City

passports than citizens and there are passport holders who do not have

citizenship. Most of the passports are issued by the Vatican on behalf of the

Holy See for diplomatic purposes only. Possession of a Holy See

diplomatic passport however does not make its holder a permanent citizen
of the city-state or give the right to enter, or reside there.

The official language of the Vatican City is Italian. The official acts of the

Holy See are drawn up in Latin. Various other languages are also in use.

By occupation the population is represented by dignitaries, priests, nuns

and guards. Several hundred lay persons are engaged in secretarial,

domestic, trade and service jobs. Some of them dwell in the territory of the

Vatican but the majority, approximately 3,000 employees, live outside the

Vatican.

5. Monetary Unit

Vatican lira. 1 Vatican lira (VLit) = 100 centesimi [chentezimi]. Vatican

lira is at par with the Italian lira. Vatican coins are similar in value, size and

denomination to those of Italy, although the monetary system is separate

from that of Italy. The value of annually issued Vatican coins is restricted

by an agreement with the Italian government. Vatican coinage is a legal

tender in Italy and San Marino, another tiny city-state in the territory of

Italy. Italian notes and coins are legal tender in the Vatican City. []

6. Chief Exports

N/A

7. Chief Imports

Almost all supplies, including food, water, electricity and gas must be

imported. Electric power is supplied by Italy.

8. Gross Domestic Product (GDP)

In 1999 the State of the Vatican City had the GDP of $US 21 million and

GDP per capita of $US 21,198. On the basis of the total sum of GDP it

occupies the penultimate place among the states included by the UN in its

country statistics. While being the smallest of all the countries by the size

of its population, in terms of GDP per capita the Vatican City enjoys a very

respectable 18th position.

9. Balance of Trade

N/A

10. Country Map in Regional Context

See insert.

11. Overview of Economy

The wealth of the Vatican is primary that of the Church. The economy of

this city-state is unique. It is noncommercial and financially supported

with contributions (known as Peter's Pence) from Roman Catholics

throughout the world, as well as the sale of postage stamps and tourist

mementos, coins issues, the sale of publications and fees for admission to

Vatican museums. These museums can accommodate 20,000 visitors

daily.

The country receives interests on investments worldwide. The City has its
own telephone system, post office, gardens, astronomical observatory,

radio station, banking system, and pharmacy. The Vatican produces little

else than religious artifacts. Its material requirements are largely met from

Italian sources.

Identifiable areas of economic activities relate to printing, production of

mosaics and staff uniforms, world-wide banking and financial operations.

Costs of running the national economy relate to the expenses incurred by

Vatican Radio, TV and the newspaper (L’Osservatore Romano), foreign

papal visits, diplomatic missions, building maintenance. The Vatican has

initiated global marketing of various types of merchandise to fund specific

projects. There are also plans to set up a chain of theme stores around the

Catholic world, with the first one to be opened in New York.

Peter's Pence - one of the main sources of income of the Holy See. In certain periods it was

practically the only one. Peter’s Pence in the present meaning of the word is an entirely

voluntary contribution of the faithful to the successor of Peter according to their wealth,

generosity, piety. The Pope and his collaborators distribute the offerings as the need for

financial assistance, including charities, arises. As a regular organized way of collecting money

Peter’s Pence has an Anglo-Saxon origin. After the conversion to Christianity, many

Englishmen started making pilgrimage to Rome. As the number of English pilgrims had

gradually increased by the end of the eighth century, a sort of pilgrims’ home was founded in a

district close to St Peter’s in order to give the English pilgrims in Rome financial help. Peter’s

Pence was officially born when a yearly tax of one penny on every family living in the kingdom

of Wessex was enforced. The tax became known as Romescot - the scot to be paid to Rome.

The habit of collecting money for the Church in Rome gradually spread to other countries.

Vatican has a special office to administer donations flowing from all over the world. Today

Peter’s Pence is organized in the following way. Every year on a certain day in all the Catholic

churches in the world a collection is held for the Pope. Usually the day is the 29th of June, Saint

Peter’s day. However, in many dioceses it is done on another day, usually the closest Sunday.

Individuals also sent cheques and small banknotes to the Pope personally. The biggest

contributor to the Peter’s Pence is the Catholics living in the US. Because of the irregular way

the money comes and the way it is administered it is practically impossible to assess the

amounts involved.

12. Politics, Government and Taxation

The State of the Vatican City is a monarchical-sacerdotal state, which

operates in the manner of elected monarchy and also is the seat of the RC

church. The reigning Pope (Supreme Pontiff), elected by 120 members of

the College of Cardinals, is the chief of the state as well as the head of the
Church. The current Pope is John Paul II (Karol Wojtila) since 16 October

1978. The Pope has supreme executive, legislative and judicial power over

the Vatican City and holds his office for life. As the head of the universal

church the Roman pontiff also exercises executive, legislative and judicial

power within the Church. Given the scope of his authority, an intricate and

complex structure of official agencies has been established to administer

power within carefully designed categories. This structure is commonly

known as the Roman Curia. Its members are appointed and granted

authority by the Pope.

The Vatican City as a state is recognized under international law and enters

into international agreements. Unlike the Holy See, [which operates the

worldwide RC church] it does not receive or send diplomatic

representatives. Strictly speaking, the State of the Vatican City is not a

civil, national state but rather a headquarters of the RC church. The state

operates according to the Apostolic Constitution of 1967. Though there is a

constitution, the Vatican City is an absolute monarchy. The role of the head

of the government belongs to the Secretary of State Archbishop. Cabinet

consists of the Pontifical Commission appointed by the Pope. Judicial

functions are usually handled by Italy. The legal system is based on canon,

or ecclesiastical law. If canon law is not applicable, the laws of the city of

Rome are invoked. Suffrage is limited to cardinals who are less then 80
years old. There are no political parties or army in the country. Defense is

the responsibility of Italy as the Swiss Guard fulfils ceremonial functions

only, although they are responsible for personal safety of the Pope since

1506. Responsibility of policing the territory of the City is assigned to the

Civil Guard.

There are no taxes, no restrictions on the import or export of funds, and no

customs/excise in the Vatican City. Employees of the Vatican City pay no

income tax and no customs duty on petrol or goods that they buy at the

Vatican shop. Non-Italians enjoy allowances on monthly salaries.

13. Infrastructure, Power, and Communications

Vatican has a heliport (to transfer foreign visitors from the airport in

Rome) and 862m (about half a mile) of rail tracks, connected to Italy's

network at Rome's Saint Peter's station, which are used for carrying freight.

Vatican telecommunications started in 1886, at the beginnings of

telephony. Regular telephone services within the Vatican State began after

it gained independence in 1929 with the installation of a number of

telephones in various Vatican offices and residences linked via the Roman

urban telephone network. The first central telephone exchange, donated by

the American Catholics was installed in 1930 and provided telephone

services for approximately 360 end users. It remained in use until 1960

when it was replaced by a new exchange with a capacity of 1,500 numbers

later extended to 3,000. In June 1992 the Vatican State's third central

telephone exchange was inaugurated providing the Vatican City with a

most advanced technological interface compared to the rest of the world,

thus qualifying the State of Vatican City amongst the first to have a

completely numeric telephone network. The plant consists of a modern

numeric telephone exchange with 5,120 terminations, connected via optic

fiber TelecomItalia's network. The exchange is also equipped with a

numeric switch for operator call management and it is linked via radio to

the extra-territorial zones.

14. Economic Sectors

The country's economy is unconventional and does not consist of sectors

and industries. However, printing and production of a small amount of

mosaics and staff uniforms, visitors’ offerings, worldwide banking and

financial activities contribute into the State’s economy. Selling of

collectable items such as stamps, coins and Vatican Telephone Cards is

another source of financial inflow. The sale of stamps, in particular the sale

of special series to stamp dealers and collectors, has turned into quite a big

business. Vatican stamps have great appeal and increase in value rapidly

within weeks of their issue. Only a limited amount of sets of each series is
sold to private stamp dealers and collectors on the basis of advance

booking. The rest is sold to religious orders and other church institutions,

which in turn sell them to stamp dealers with a quite handsome margin of

profit. Thus not only the Vatican but also the church as a whole derives a

considerable gain from the trade in stamps. Tourism, although a noticeable

source of the country’s income, has never been developed as a specialized

branch of the national economy. Vatican is an outstanding tourist attraction

by itself, as it possesses priceless cultural values: the largest and the most

valuable collections of art and books in the world.

15. Agriculture

N/A

16. Industry

N/A

17. Services

N/A.

18. International Trade

N/A
19. Money

The budget of the Holy See is not entirely transparent. It consists of the

nearly fifty separate budgets with some raising funds from such

uncontrollable sources as donations and gifts. Traditionally financial

arrangements of the Holy See kept secret. Banking operations and

expenditures have been reported publicly only since early 1980s. The RC

church has developed own structures to retain full control over its property,

cash flows and other assets. It does not admit accountability to the laity for

its funds, which are managed by church own bureaucracy. There is a strong

movement nowadays in Catholicism for public financial reporting.

The Pope, whose head appears on the Vatican coins, carries no money but

he is directly involved in decisions on financial policy. The State of the

Vatican City publishes consolidated budget and a budget report

“Consolidated Financial Statements of the Holy See” prepared by the

president of the Prefecture for the Economic Affairs of the Holy See, who

acts as the pope’s treasurer. This report makes public only the finances of

the administrations of the Holy See. This partial disclosure does not allow

to speculate on other accounts, among which are the Vatican Bank (Istituto

per le Opere di Religione (IOR) - Institute of Religious Works), the

Vatican City State and other entities. Their financial statements are not

made public. Although it is known then about half of the budget incomes of
the Vatican City State are used to help finance the Holy See.

The Holy See’s income comes primarily from investments and donations.

Among the] main source of Vatican’s income is the IOR. The recipient of

the profits made by this bank is the Holy See. [Besides making operational

profit the bank provides banking services (checking and saving accounts,

currency exchange, etc.).

Institute of Religious Works was founded in 1887 to help to manage church finances after

the Papal States had become a part of Italy. It] operates like any other bank. What makes it

different is its clientele – a very select group. The clients are residents of the Vatican City

State, Vatican offices, diplomats accredited to the Holy See, members of the Curia, heads of

the religious orders, religious agencies and institutions (schools, hospitals), and a very few

Italian citizens to whom the privilege was granted because of their business relations with

Vatican or their good work on behalf of the Church. The advantage of banking with Vatican,

apart from the prestige, is that it is completely free of currency regulation and a client can

transfer money to any part of the world with maximum ease. Keeping money in the Vatican

bank protects Catholic institutions from having their money frozen or confiscated by

unfriendly governments. The Popes current account is reported to bear the number 16/16.

The Institute itself regularly receives lump sums (usually ten per cent of the

amount of the deposit) when a client dies, as it is a custom for laymen to

leave some assets to the bank in their wills.

The other principle financial office of the Vatican is the Administration of

the Patrimony of the Holy See (APSA), which manages the Holy See’s
cash and investments, including its patrimony and pension fund.

The current value of the Vatican’s vast investments is unknown. The

Vatican follows internationally diversified investment policy for its

portfolio of stocks and bonds. The Vatican avoids investments in industries

that the church considers unethical. At least two-thirds of the capital is

invested in Italy.

The main fields of the investment activity of the Holy See’s entities are

banking, insurance, financing, real estate, utilities, building, the production

of flour and spaghetti. Vatican tends to invest in companies that cater for

basic human needs and thus are fundamentally sound. Overall Vatican has

the reputation of a prudent investor. Apart from shares in private

enterprises Vatican holds a large amount of government bonds and

debentures (titoli and obbligazioni). The State derives some income from

the real estate (rent from apartments and shops) as well. Furthermore,

Vatican has several thousands hectares of land, comprising some valuable

building sites, in particular in the vicinity of Rome. Vatican has some gold

reserves kept in Fort Knox, USA.

20. Poverty and Wealth

There is no poverty in the Vatican City. Health and pension provisions are
good. It is not known how much personal wealth its citizens have.

However, it is accepted that on average the incomes and living standards of

lay workers are comparable to or better than those enjoyed by employees in

the city of Rome. No inhabitant may posses land property within the

borders of the Vatican City, as the land is the private domain of the Holy

See.

21. Working Conditions

Working week is reasonable and employees benefit from numerous

religious holidays. Top officials of the Secretariat of State keep longer

hours then many business executives in other countries. Italians working

for Vatican are exempt from military service. Swiss Guards have relatively

low pay, but those enlisted are usually young men with private incomes.

Civil Guards have higher salaries plus family allowances. The highest paid

Vatican officials are the Cardinals of the Curia. By tradition out of the first

month’s plate, immediately after appointment, two-thirds are deducted

and kept aside for the Cardinal’s funeral.

Plate - the Cardinal’s salary is called a “plate” from the days when it was made up of heavy

gold and silver coins and handed to him on a plate tray.

22. Country History and Economic Development

IV century to 1870 The Vatican gained control of territory around

Rome and served as the capital of the Papal States. Popes in their secular

role ruled much of the Italian peninsula, including Rome, for more than a

thousand years. After the unification of Italy in the late-19th century, the

Pope retreated into the Vatican enclave.

1929 Vatican City's sovereignty and Papal jurisdiction within the City

were recognized by the Italian government in the Conciliation Treaty on

the 11th of February, which with two other pacts, “Concordat” and

“Financial Convention”, constituted the Lateran Treaty (Patti Lateranesi).

Lateran Accords resolved the disputes between a series of popes (former

Papal States) and Italy regarding the status of the Vatican City, granted

Roman Catholicism the position of state religion in Italy and brought the

Holy Sea 750 million lire in cash and one billion lire in government bonds

as a partial compensation for the papal territories annexed by Italy during

the process of unification. The Lateran Accords became a part of the 1948

Constitution of the Italian Republic.

1984 a major reshuffle of offices in the Roman Curia resulted in the

delegation of the routine administration of Vatican City to a pontifically

appointed commission of five cardinals headed by the Secretariat of State.

In 1984 a concordat between the Vatican and Italy modified certain of the

earlier treaty provisions, including the primacy of Roman Catholicism as

the Italian state religion.

Vatican is a member of some international organizations and institutions,

among which are: International Atomic Energy Agency (IAEA),

International Confederation of Free Trade Unions (ICFTU), International

Telecommunications Satellite Organization (Intelsat), International

Organization for Migration (IOM) (observer), International

Telecommunication Union (ITU), Organization of American States (OAS)

(observer), Organization for Security and Co-operation in Europe (OSCE),

United Nations (UN) (observer), UN Conference on Trade and

Development (UNCTAD), UN High Commissioner for Refugees

(UNHCR), Universal Postal Union (UPU), World Intellectual Property

Organization (WIPO), World Trade Organization (WTO) (observer). The

Holy See is especially active within the framework of the United Nations.

It has permanent observer status at the United Nations in New York, the

Office of the UN in Geneva and specialized institutes, the UN Food and

Agriculture Organization in Rome, and the UN Educational, Scientific,

and Cultural Organization in Paris. The Holy See also has a member

delegate at the International Atomic Energy Agency and at the UN

Industrial Development Organization in Vienna. The Holy See has

diplomatic relations with the European Union in Brussels.

23. Future Trends

Despite the importance of the papacy for the Catholic Church and despite

its role in international affairs, Vatican’s internal workings are little known

to Catholics, to world leaders, or to the public at large. Partially this is the

result of the secretive nature of the Vatican, which sees little advantage in

letting others know its internal operations. At the same time general

ignorance of the functioning of Vatican is bred by the uniqueness of this

state with its unusual laws, structures, goals, procedures, personnel, and

culture. Present concerns of the Holy See include the failing health of Pope

John Paul II, who turns 80 on 20 May 2000, inter-religious dialogue and

reconciliation, the adjustment of Church doctrine in the era of rapid

change. About 1 billion people worldwide profess the Catholic faith. In

order to achieve its spiritual and temporal goals, the Vatican must operate

in the real world. It has to buy equipment and office supplies, pay salaries

and other expenses. Limits on funds mean limits on activities. The Vatican

requires a stable and dependable financial organization raise money and

spend it wisely, but financial scandals and mismanagement have

repeatedly blemished the papacy.

 24. Bibliography

Annuario Pontificio per l'anno. Vatican, Vatican City: Tipografia

Poliglotta Vaticana, 1912 - .

Bull, George. Inside Vatican. London: Hutchinson & Co. Ltd., 1982.

Coppa, Frank J. Encyclopaedia of the Vatican and Papacy. London :

Aldwych Press; Westport, Conn. : Greenwood Press, 1999.

Hutchinson, Robert. When in Rome: an Authorised Guide to the Vatican.

London: HarperCollins, 1999.

Papafava, Francesco (ed.). Vatican. London: Muller, 1984.

Pallenberg, Corrado. Vatican Finances. London : Peter Owen, 1971.

Tully, S. The Vatican's Finances. Fortune, 1987 December 21, pp. 18-26.

World Desk Reference. Web site:

http://travel.dk.com/wdr/VA/mVA_Intr.htm. Accessed January 2001.

Web site: www.geographic.org. Accessed January 2001.

Web site:

http://www.photius.com/wfb2000/countries/holy_see/holy_see_introducti

on.html Accessed January 2001.

Official Web site of the Holy See: http://www.vatican.va/. Accessed

January 2001.

Olga Kuznetsova

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