Vatican City - Country history and economic development

The papacy has a very long and complex history, dating back to medieval times. Over the centuries, successive popes came to rule in Papal States across Europe (notably in France) as well as taking control of much of Italy in a secular as well as religious capacity for 1000 years. The present-day Italian capital of Rome was the capital of the Italian Papal State. In the 5th century, the Emperor Constantine I built the Basilica of St. Peter's. After this, Pope Symmachus built a palace nearby, but this did not become the Papal residence—the Vatican Palace—until 1377 when the papacy returned from its period of exile in Avignon, France.

It was from this time that a succession of popes— most notable among them Sixtus IV, Innocent VIII, Alexander VI, Leo X, and Clement VII—proved to be committed patrons of the arts, and were variously responsible for building and stocking the magnificent libraries and museums that can be seen today. From the 17th to the 19th centuries, the Papal residence was transferred to the Quirinal Palace, later Italy's royal palace, and now the official residence of the Italian president.

Papal rule ended with the Unification of Italy in 1870, when Victor Emmanuel became king of Italy, and the Papal territories, including Rome, were incorporated into the newly formed Italian state. The papacy retreated to the Vatican, where a succession of popes disputed their position with the Italian government.

In 1929, the Italian government and the Holy See finally reached agreement and signed a treaty recognizing the independence of the Holy See and creating the sovereign State of the Vatican City. Under this agreement, known as the Lateran Accords, the Italian government also awarded the Vatican 750 million lire in cash and 1 billion lire in government bonds as partial compensation for the papal territories annexed by Italy during the process of unification.

In 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 5 cardinals headed by the Secretariat of State.