Cardinal Dario Castrillon Hoyos was president of the Vatican department set up 20 years ago to seek a rapprochement with a hard-core traditionalist splinter group at the center of the Holocaust-denial scandal that erupted in January.
The pope has now put that department, known as Ecclesia Dei, under the control of the Vatican's doctrinal department and has named American Cardinal Joseph Levada as its new president.
Ecclesia Dei, which means "Church of God," was widely blamed for the international uproar that followed when the pope lifted the excommunication of four bishops from the traditionalist Society of St Pius X (SSPX).
By lifting the excommunications, the pope was trying to heal a 20-year-old rift that began when they were disciplined for being ordained without the permission of Pope John Paul II.
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