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Vatican credit stop emblematic of finance woes

Thursday - 6/13/2013, 12:33pm  ET

In this picture taken on Monday, June 10, 2013, Ernst von Freyberg, president of the Vatican Bank I.O.R. (Istituto per le Opere Religiose), talks with the Associated Press during an interview at his office in Vatican City. The Vatican still hasn’t fully solved an embarrassing shutdown in credit card services, despite announcing four months ago that systems were back up - as Pope Benedict XVI’s shock resignation laid the ground for a bonanza in Vatican-minted papal memorabilia. The impact has been far worse than the Vatican ever let on, costing the Holy See a fortune at a time when the Catholic world is still buzzing with excitement about the election of Pope Francis. (AP Photo/Domenico Stinellis)

Associated Press

VATICAN CITY (AP) -- The Vatican put a new coin on sale last week to commemorate its historic papal transition. Too bad overseas collectors won't be able to buy it for months.

The Associated Press has learned that the Vatican still hasn't fully resolved an embarrassing shutdown in credit card services, despite announcing four months ago that systems were back up. The impact has been far worse than the Vatican ever let on, costing the Holy See lost sales at a time when Pope Benedict XVI's shock resignation and Pope Francis' surprise election laid the groundwork for a bonanza in Vatican-minted papal memorabilia.

It's all emblematic of the continued troubles plaguing the Holy See's financial system, rocked by allegations of incompetence and corruption. But the new president of the Vatican bank, while acknowledging the delays and losses stemming from the credit card shutdown, is brushing off the fiasco.

"So sales will be up in the second half of the year," Ernst von Freyberg told the AP in an interview, laughing.

The truth is, however, that the credit card woes represent yet another headache for the Vatican as it works to improve its reputation internationally through a painful transition to financial transparency in the fight against money laundering.

In an interview this week, von Freyberg revealed that he was weighing whether to introduce some sort of tax reporting obligations on the bank -- known as the Institute for Religious Works -- to stem accusations that it's a tax haven.

"It may well be that having done a thorough legal review," von Freyberg said, "I come to the conclusion that we should pay more proactive attention to it."

The credit card debacle began Jan. 1 when Italy's central bank compelled Deutsche Bank Italia to stop providing electronic payment services to the Holy See. The Bank of Italy cited the lack of an EU-required banking regulatory framework in Vatican City.

The shutdown meant visitors to the Vatican Museums had to use cash to pay for tickets, audio guides and coffee table books on Michelangelo. It was a costly inconvenience given that museum revenues are the top money-maker for the Vatican, bringing in euro 91.3 million in 2011. The Vatican's other money-making initiatives were similarly affected: Its supermarket, pharmacy and duty-free department store were cash-only. So was its Philatelic and Numismatic Office, which issues commemorative and circulating stamps and coins for collectors and tourists alike.

"A disaster. A disaster. A disaster!" lamented Mauro Olivieri, the head of the coin and stamp office, which in 2012 was the Vatican's third-place money-maker with some euro 20 million in revenues. "The year 2013 has been what I call the 'annus horribilis.'"

The first half of 2013 should have been a windfall for Olivieri, given the world's attention was fixed on the Vatican for a solid month, from Benedict XVI's historic Feb. 11 announcement that he would retire at the end of the month, to the March 13 election of the first Jesuit pope and first pontiff from the Americas, Francis.

Such historic occasions are sought-after by coin and stamp collectors, who lined up in droves at temporary sales points in St. Peter's Square to buy the commemorative "Sede Vacante" stamps that were issued as soon as Benedict retired Feb. 28.

"Linn's Stamp News," the largest U.S. weekly on stamp news and the market, featured the four-stamp "Sede Vacante" collection on the front page of its March 18 editions.

But anyone who placed an order through the Vatican to buy the stamps electronically received word that credit card systems were down and orders couldn't be processed, even though the Vatican had announced two weeks earlier that the shutdown had been resolved.

So the order forms, thousands of them, piled up in boxes in Olivieri's offices.

Finally, on May 27 -- five months after the shutdown -- credit card sales resumed for stamps and coins, but the damage was done. The office is months behind schedule, with a backlog dating to November.

Overseas collectors who have long put up with the Vatican's antiquated way of handling orders -- through a time-consuming and labor-intensive subscription and order process rather than simple e-commerce -- said it was almost the final straw.

"They don't seem to run it like a business," said Henry Gitner, the main U.S. stamp dealer and retailer who years ago stopped buying directly from the Vatican because of the difficulties he encountered. "The only way to get guaranteed delivery ... is to literally have someone there buy it and ship it, and then you're paying a 10-15 percent commission."

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