“The Vatican City-State” isn’t “Catholicism,” though. The Vatican City-State didn’t even exist until 1929, and the Catholic Church could go on existing just fine if the Pope moved to Poughkeepsie.
But he won’t move to Poughkeepsie, will he? Because he believes that when Christ returns to set up His kingdom, it will be in Rome, not Jerusalem. That kingdom, BTW, will be both a religious kingdom and a political kingdom on this earth. You don’t find it strange that the Catholic Church is set up EXACTLY the same way?