Relations with the Kingdom of Italy were difficult during the papacies of Pius IX and Leo XIII, who had to endure the status of prisoner of the Vatican after the capture of Rome, refusing to recognize the Law of Guarantees. Leo XIII forbade Christians from participating in elections and accused the Italian state of being controlled by freemasons.
The new Italian Republic established in 1946 recognize freedom of religion. However, under Pius XII and Paul VI, the Christian Democrats thrived and had great influence on Italian politics, in order to stop the Italian Communist Party getting into power.
Due to the size of the Vatican City State, embassies accredited to the Holy See are based on Italian territory. Treaties signed between Italy and the Vatican City State permit such embassages. The Embassy of Italy to the Holy See is unique amongst foreign embassages in that it is the only embassy based on its home territory.
The Holy See maintains formal diplomatic relations with 176 sovereign states, the European Union, and the Order of Malta; 69 of the diplomatic missions accredited to the Holy See are situated in Rome, though those countries then have two embassies in the same city, since, by agreement between the Holy See and Italy, the same person cannot be accredited simultaneously to both.
This is shown clearly by the fact that Italy recognizes the People's Republic of China, and as such, the PRC Embassy to Italy is in Rome. However, the Vatican City State recognizes the Republic of China (which controls Taiwan), and as such, the ROC Embassy to the Holy See is also in Rome. As Italy was the first country to recognize the Holy See as a sovereign nation, their embassy was the first one established.
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