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An Unholy Alliance

The seventy-nine-year-old Pius died on August 20, 1914, having lived just long enough to see the outbreak of World War I. By the time the cardinals began gathering for their conclave, the Germans had captured Brussels and were within thirty miles of Paris. The Russians had advanced into East Prussia. Thousands had died in major battles. Pressured by their own governments and spurred by nationalism, the French, German, and Austrian cardinals arrived in Rome each promoting their own partisan as the next Pope. They also had compiled short lists of cardinals they intended to oppose at all costs.

After ten rancorous ballots Bologna’s Cardinal della Chiesa, a long shot, emerged to become Benedict XV.1 After deadlocking on more partisan choices, a majority overcame the German and Austrian objections and coalesced around the moderate della Chiesa. Having endured Pius’s brutal modernist purge, the cardinals settled on a leader they hoped could guide the church through the war without becoming mired in the often debilitating internal theological battles waged by traditionalists on reformers. The diminutive, thin Genovese aristocrat—his nickname was Picoletto (tiny one)—not only had a reputation as a Francophile but he had been a cardinal for only three months.2

Judging by his appearance, it did not seem that Benedict could match Pius’s unrelenting fire. A childhood accident had left him with only one working eye and ear. His voice was high-pitched. One shoulder was noticeably higher than the other, and he had a halting limp and an ashen complexion. “I am but an ugly gargoyle on the beauties of Rome,” he commented once about his demeanor.3

Benedict promptly set to mark the Papacy as his own. He dismissed his strongest rival, the British-educated Spaniard Cardinal Merry del Val, giving the Secretary of State just enough time to clean out his desk.4 And he kept Pacelli ostracized but also shunned the advice of other senior advisors he inherited. A fresh start appealed to Benedict—especially since he faced navigating the church through the uncertainty of a worldwide war. The conflict battered the church’s balance sheet. Peter’s Pence contributions from warring nations like France and Belgium plummeted.5 After Italy declared war against Germany in 1916, donations from German Catholics also tumbled.

The crisis created by the plunging revenues was exacerbated by Benedict, who turned out to be a spendthrift.6 He yearned for the days of a majestic Papacy. Some of his directives—such as reinstalling the right of lay Catholics to kiss his slippers and again banning anyone from eating with the Pope—came at no cost. But to restore the pomp that predecessors had eliminated was expensive.7 And since he relied on the mediocre advice of a few handpicked cardinals who had little better business sense than he, the Vatican had trouble figuring out how to stem the hemorrhaging.8 Compounding the problem was that the church’s fixed costs had soared as the buying power of the lira had nose-dived due to hyperinflation.9 Only a year after becoming Pope, Benedict had trouble paying even the salaries of his court.10

Unaware of the church’s own dismal finances, when the Bank of Rome got squeezed in a credit crunch, its chairman, Count Carlo Santucci, a devout Black Noble, beseeched Benedict for a bailout. Santucci was the Pope’s own pick to replace Pacelli as the bank’s chief. He convinced the cash-strapped Benedict that the best way to protect the church’s stake in the bank was to invest more money. The Vatican scrounged up 9 million lire, with which it could ill afford to part.11 But the infusion was not enough. Halfway through the war, the Vatican’s 42.5 million lire equity in the Bank of Rome was worth less than 15 million.12 And it lost millions more in trying to save several regional Catholic banks.

Benedict had no better luck in misguided efforts to bolster five leading Italian Catholic dailies.13 They had lost advertisers during the war and the cost of paper and ink had risen steeply. During peacetime, they had eked out small profits, but the war brought debt of some 8 million lire. A couple teetered on the verge of bankruptcy. The Vatican did not want to use its own money, instead asking American bishops for a long-term, low-interest-rate loan of $500,000. But since the U.S. church was in the middle of its own financial crunch, the American bishops declined.14 Benedict had no choice but to dissolve the centralized financial hierarchy that ran the newspapers. The Pope reluctantly approved a long-term loan of nearly 2 million lire and also convinced another Black Noble, Count Giovanni Grosoli, to forgive some remaining debts he had previously advanced.15

Benedict fared little better politically than he did financially. He lobbied through intermediaries to prevent Italy from joining the Allies (Britain, France, and Russia). Catholic newspapers argued that joining the war was bad for the country (those “stay neutral” pleas were covertly subsidized by a German diplomat based in Rome).16 At one stage the Pope thought he had brokered a deal by which Austria would abandon its claim to its former Italian territories in return for Italy staying neutral. That deal fell through.17

Benedict knew he had few good options. Italy and the Austro-Hungarian Empire were crucial Catholic bastions. That they might fight each other was distressing enough. Benedict agonized publicly about “the monstrous spectacle of this war with its streams of Christian blood.”18 But equally sobering was the thought that only one could be victorious. A loss by the Austrians could weaken their role as a wall against Russian Orthodoxy. And if Italy joined the Allies and lost, social instability might spread throughout the country. Although Benedict had no love for Rome’s secular government, he realized the possibility of widespread civil unrest in the wake of a defeat would be terrible for the Vatican.

Benedict failed to get Italy to stay neutral. The Italians declared war on Germany and joined the Allies in 1915. That did not change the Allied view that the Pope was unabashedly pro-German.19 British intelligence had confirmed that Benedict had authorized purchases of so-called Italian War Loans that raised money for the war.20 And the Allies had also learned that Benedict believed that Germany and Austria-Hungary—the Central Powers—would prevail. His conviction was so strong that he approved a substantial Vatican investment in Austrian stocks, a decision that resulted in sharp losses.21 The Allies also knew that the Vatican rented one of its Roman properties to an arms manufacturer that supplied the Germans (when the British eventually leaked that to the press, the church feigned shock, claiming it was not aware of its tenant’s business).22

Even the Allies did not know the extent of the Vatican’s secret connection to the Central Powers. Germany was covertly funneling cash to the church through Swiss banks and labeling it “Peter’s Pence.”23 That helped stabilize the church’s finances. The German Foreign Ministry separately sent the Vatican cash from a propaganda slush fund. And the Austrians joined with a clandestine subsidy to Benedict.24 Besides the secret payments, Matthias Erzberger, the head of Germany’s Catholic Center Party, raised money for the Vatican from German businesses and wealthy industrialists. So pleased was the Pope with the large donation Erzberger presented to him in 1915 that the Pontiff thanked him with special gifts and a Papal decoration.25

In January 1917, Italian authorities charged Monsignor Rudolf Gerlach, a Papal chamberlain, as a German spy.26 The Vatican, tipped off to Gerlach’s imminent arrest, whisked him from Italy to Switzerland. Several lay co-conspirators were put on trial and found guilty, while Gerlach was convicted in absentia and sentenced to life.27 Benedict was shocked, by all accounts, that someone he trusted had acted both as a German paymaster for covert operations as well as passing secret communications through the Vatican’s diplomatic pouches.28,I The Gerlach episode fueled rumors across Italy that the Pope had struck a secret deal with the Central Powers to return to the church most of the Papal States after the war.30

The Pontiff released a seven-point peace plan on August 1, 1917, three years into the war.31 Benedict and his Secretary of State, Cardinal Gasparri, thought it would make the church a key mediator for peace. But the Allies ignored it, having long ago decided to snub any Papal entreaties for ceasing hostilities. America had entered the conflict only four months before Pius released his plan. With the United States in the war, the Allies felt even more confident to disregard the Vatican. Some mocked the plan’s generalities: “We have never ceased to urge the belligerent peoples and Governments to become brothers once more.” Even the Central Powers derided as naive and impractical Benedict’s call for countries to disarm after the war.32 The Papal peace overture was such a flop that it only further weakened the church’s influence.33

Although the Allies ignored the Pope, since they considered him pro-German, many Catholics in war-torn Europe thought he had abandoned them by failing to endorse either side (a French priest in Paris reflected a common sentiment, “Holy Father we do not want your peace”).34 When Italy’s army was routed at Caporetto in November 1917, Italians blamed the Pontiff for spreading “defeatism.”35 As the war stretched on, donations to the church kept declining. The annual pilgrimages to St. Peter’s dried up and large-scale Papal audiences—used by the Vatican as fundraising events—disappeared.

The nadir for Benedict’s diplomatic influence came when the Allies refused to allow the Vatican to be included in the 1919 Paris Peace Conference.36 When the war had begun, Benedict’s main worry was that Russian Orthodoxy might seep westward. The Bolshevik Revolution during the middle of the war meant now that hostilities were over, the threat from Russia had dramatically changed. The hard-line Russian communists were equal-opportunity atheists, zealously eradicating temples, churches, and synagogues and promising to export their godless revolution around the globe.37

Not long after the war ended a small cadre of clerical advisors insisted to Benedict that finances, not politics, be paramount. Since he had become Pope, the church had lost almost 60 million lire—about 40 percent of its capital—on a broad range of soured investments.38 Years of war had left much of Europe ravaged and millions of Catholics faced high unemployment and a great recession.39 Distressed congregants in Germany, Austria, and Hungary were clamoring for financial aid from the Vatican.40

The only positive glimmer was that French Catholics somehow managed to increase their donations in the run-up to Joan of Arc’s highly publicized canonization. Forty thousand French pilgrims came to Rome for the ceremony.41 But it was not enough. The Vatican’s crisis forced it to open its books in 1919 to the Italian government to avoid cash-strapped bureaucrats from taxing the church’s income.42

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


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