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Undoubtedly, the fact that the development of the Catholic church was affected by it's possession of the so-called Papal States....
However this need not be so. Around the middle of the 10th century a seperation of Church and State was established under Alberic II Patrician of Rome. Unfortunately he died in his 40's and had the nobles of Rome elect his son Octavian Patrician and Pope upon his death and the death of the reigning pontiff. Octavian would take the papal name John XII and go on to be one of the worst popes in Catholic history.
Now What if Alberic II lives into his 60's and his son Octavian continues the precedent of seperating the Catholic Church from the "Papal States"? How would this effect the development of the Catholic Church?