Not even the churches have been immune from the stock market volatility that has wiped billions from investors' funds in recent months.

The failure of Vodafone, in particular, to stop the slide of its share price has been as painful to the Church of England as it has to the hundreds of thousands of former Eircom investors now holding shares in the battered British mobile giant.

The Church of England faces new financial difficulties with the slump in the value of Vodafone shares. For the second time in recent memory, the Church is reported to be on the brink of a major financial crisis.

The £13.5 billion sterling (€20.8 billion) annual loss recorded by Vodafone at the end of last month may have wiped more than £78 million off the investments held by the church commissioners on behalf of the Church of England.

The figures are worrying for the Church Commissioners, the statutory body that administers the Church's investment portfolio, generating about one-fifth of the cash flow of the Church of England - one of Britain's biggest investors.

The commissioners are facing a steeply mounting bill for the pensions of clergy in the Church of England and other overheads. There is renewed speculation that the Church may have to sell off a number of historic houses used as episcopal palaces, amalgamate a number of dioceses, and sell of some of its art treasures.

Vodafone is the second-largest single investment owned by the Church Commissioners. At the start of last year, the commissioners' holding in Vodafone was worth £166.5 million. At that time, the commissioners came to the conclusion that their holding in technology shares was "underweight" as it amounted to a smaller proportion of their portfolio than the stock market average. Therefore, the commissioners bought more Vodafone shares.

The commissioners now refuse to divulge how many shares they bought in 2001, nor will they say what price they bought them at. However, a report in the Church Times estimates that their total holding in Vodafone stood at £158.2 million at the end of last year - a drop of £8.3 million. The serious decline in Vodafone shares has taken place since then. According to the report, the commissioners' holding is now worth £88.4 million, a drop of £69.8 million since the start of this year. The overall drop in value since the start of 2000 is estimated at £78.1 million - and this is without knowing the cost of additional shares bought in 2001.

The dismal performance of Church Commissioners' holdings on the stock market is due more to bad luck than bad judgment. Their portfolio covers an unimpeachable range of blue-chips and, in fact, has marginally out-performed the investment fund average. However, this is the second major financial crisis to hit the Church of England in recent years.

In the early 1990s, the Church Commissioners wrote off £800 million as a result of property deals that went sour. They reduced their stake in the Metro Shopping Centre in Gateshead from 100 per cent to just 15 per cent and their commercial property holdings were halved during the 1990s.

The commissioners keep about half their £4 billion cash pile in British shares, which performed dismally last year. During 2001, they saw £435 million wiped off the value of their investments, mainly due to falling stock markets. Apart from Vodafone, their other major stock market investments included GlaxoSmithKline and AstraZeneca, which tumbled badly last year too.

The Church Commissioners are guided by the Ethical Investments Advisory Group and do not invest in arms, pornography or in any company whose main business is in gambling, alcohol, tobacco or newspapers.

The Church Commissioners have indicated they intend to hold on to their Vodafone shares in the belief that their value will recover, at least in part. Meanwhile, the Commissioners must continue to draw on assets to pay the pensions of retired clergy. If its equity holding declines, they must look at other assets.

Last year, the clergy pension bill in the Church of England came close to £100 million. The figure has doubled over the past decade but overall income for the Church Commissioners has remained more or less steady. A revamped pension scheme is already reported to be in shortfall and last month a senior financial figure in the Church, the Rev Richard Turnbull, suggested clergy should start saving for their retirement and added that many clergy may need tuition in personal finance.

A survey last year showed more than one-third of Church of England clergy are in debt, and more than one in 10 who rely solely on their stipends are struggling to pay bills.