The Vatican City

Vatican City owes its sacred origins to Vatican Hill, where it is believed that Saint Peter was martyred and buried. This turned the site into a major pilgrimage destination. Following Emperor Nero's persecution of Christians, a necropolis grew around this revered apostle’s tomb. Over the centuries, the significance of the area increased, resulting in the construction of the splendid St. Peter's Basilica under Pope Julius II. This basilica holds the tomb of Saint Peter beneath its hallowed grounds.

The temporal power of the Roman Catholic Church was consolidated in the form of the Papal States. Beginning with the donation of Pepin the Short in the 8th century, these territories spanned central Italy until the 19th century. However, the Papal States met their demise with Italian unification in 1870. For nearly 60 years following this upheaval, the Popes referred to themselves as "prisoners in the Vatican," abstaining from temporal involvement.

The resolution to the standoff between the Papacy and the Kingdom of Italy crystallized in the 1929 Lateran Treaty, inked by Benito Mussolini representing the Italian government and Cardinal Pietro Gasparri for the Papacy. This accord recognized Vatican City as an independent, sovereign entity, firmly establishing the once sprawling Papal States to just 44 hectares. It also declared Catholicism as Italy’s state religion, agreed to compensatory finance for the loss of the Papal States, and led to the Pope's sovereignty over Vatican City.

The Lateran Pacts established Italian recognition of the Roman Curia, the administrative institutions of the Holy See. Furthermore, this territory on the western bank of the Tiber River, previously known as Ager Vaticanus, was granted extraterritorial rights to several buildings in Rome, effectively religious and administrative extensions of the Vatican.

The Pope, as the Bishop of Rome and the head of the Catholic Church, assumes the highest-level executive, legislative, and judicial roles in Vatican City. Sovereignty is vested in the papacy, and the Pope exercises control over the Holy See, which is the central governing body of the Catholic Church. His decisions can influence religious and administrative matters, ranging from the appointment of cardinals to supervising the work of the Roman Curia, the Church's central administrative organ. In essence, the Pope's word is final in the administration of Vatican City's governance.

The Roman Curia handles the daily operations of the church worldwide and assists in managing the affairs of the Vatican as a sovereign nation. Aspects of governance are supported by the Pontifical Commission for Vatican City State which ensures the country's temporal governance. The judicial power is conferred upon courts appointed by the Pope, and the legal system is based on Canon Law. Vatican City operates as a sacerdotal-monarchical state, where the Pope's audience and public worship take precedence over secular issues.

The Vatican economy is noteworthy for its use of the euro as its official currency, despite being a non-member country of the European Union. The euro was adopted by Vatican City in 2002 through a special agreement with Italy. The Vatican mints its own coins, often featuring the Pope — which are highly valued by coin collectors. While the economy is largely supported by contributions from the worldwide Catholic community, it also benefits from the operation of the Vatican post office, renowned for its efficiency and the issuance of unique postage stamps used by both locals and visitors.

Tourism is the pillar of Vatican City's economy, with millions of pilgrims and visitors flocking to this small ecclesiastical state every year. They contribute to the economy by paying admission fees to the famous Vatican Museums, and spending money at the souvenir shops or the Vatican's own supermarket and department store. The Italian enclave of Castel Gandolfo—the Pope’s summer residence—also generates revenue as a tourist site. The sale of publications, including official Vatican documents, is another source of income.