Vatican City, April 1 (IANS/AKI): The Vatican on Wednesday signed a key agreement to exchange tax and financial information with Italy, both sides announced. It is the first of its kind with any country for the city state and part of a major transparency drive.

In the landmark deal, the Holy See pledged full cooperation and transparency with its neighbour, paving the way for the end of decades of banking secrecy at the Vatican.

Pier Carlo Padoan, Italian economy minister, and Paul Richard Gallagher, the Vatican's secretary for relations with states, signed the deal saying it would "lead to full administrative cooperation on fiscal matters".

The tax information sharing would apply retroactively from January 2009 and bring the Vatican in line with global standards established by the Organisation for Economic Cooperation and Development (OECD), a joint statement said.

The deal will require full fiscal compliance for Italian citizens with financial activities in the Vatican, long suspected by Italian officials to be a source of tax evasion and money laundering.

The agreement follows months of negotiations and Vatican officials said in March they were seeking similar deals with other countries.

The Vatican has in recent years undertaken sweeping reforms of the Catholic Church's finances to make them more transparent.

Thousands of accounts and “customer relationships” have been frozen at the Vatican Bank, known as the Institute for Religious Works (IOR) since Pope Francis's election in March 2013.