How do we confess that the Church is holy when there are sinners in the Church? How does holiness and sin reside together in the same place? What does it mean to confess with the Creed, "I believe the holy Catholic Church."? Here is an excerpt from the book "Introduction to Christianity" (be sure to read through this, especially through the last paragraph):
"The holiness of the Church consists in that power of sanctification which God exerts in it in spite of human sinfulness. We come up here against the real mark of the "New Covenant": in Christ God has bound himself to men, has let himself be bound by them. The New Covenant no longer rests on the reciprocal keeping of the agreement; it is granted by God as grace which abides even in the face of man's faithlessness. It is the expression of God's love, which will not let itself be defeated by man's incapacity but always remains well-disposed towards him, welcomes him again and again precisely because he is sinful, turns to him, sanctifies him and loves him.
Because of the Lord's devotion, never more to be revoked, the Church is the institution sanctified by him forever, an institution in which the holiness of the Lord becomes present among men. But it is really and truly the holiness of the Lord that becomes present in it and that chooses again and again as the vessel of its presence – with a paradoxical love – the dirty hands of men. It is holiness that radiates as the holiness of Christ from the midst of the Church's sin. So to the faithful the paradoxical figure of the Church, in which the divine so often presents itself in such unworthy hands, in which the divine is only ever present in the form of a "nevertheless", is the sign of the "nevertheless" of the ever greater love shown by God. The existing interplay of God's loyalty and man's disloyalty which characterizes the structure of the Church is grace in dramatic form. [. . .] One could actually say that precisely in its paradoxical combination of holiness and unholiness the Church is in fact the shape taken by grace in this world.
Let us go a step further. In the human dream of a perfect world, holiness is always visualized as untouchability by sin and evil, as something unmixed with the latter. [. . .] In contemporary criticism of society and in the actions in which it vents itself, this merciless side always present in human ideals is once again only too evident. That is why the aspect of Christ's holiness that upset his contemporaries was the complete absence of this condemnatory note – fire did not fall on the unworthy nor were the zealous allowed to pull up the weeds which they saw growing luxuriantly on all sides. On the contrary, this holiness expressed itself precisely as mingling with the sinners whom Jesus drew into his vicinity; as mingling to the point where he himself was made "to be sin" and bore the curse of the law in execution as a criminal – complete community of fate with the lost (cf. 2 Cor. 5.21; Gal. 3.13). He has drawn sin to himself, made it his lot and so revealed what true "holiness" is: not separation but union, not judgment but redeeming love.
Is the Church not simply the continuation of God's deliberate plunge into human wretchedness; is it not simply the continuation of Jesus' habit of sitting at table with sinners, of his mingling with the misery of sin to the point where he actually seems to sink under its weight? Is there not revealed in the unholy holiness of the Church, as opposed to man's expectation of purity, God's true holiness, which is love, love which does not keep its distance in a sort of aristocratic, untouchable purity but mixes with the dirt of the world, in order thus to overcome it? Can therefore the holiness of the Church be anything else but the mutual support which comes, of course, from the fact that all of us are supported by Christ? [. . .]
At bottom there is always hidden pride at work when criticism of the Church adopts that tone of rancorous bitterness which today is already beginning to become a fashionable habit. Unfortunately it is accompanied only too often by a spiritual emptiness in which the specific nature of the Church as a whole is no longer seen, in which it is only regarded as a political instrument whose organization is felt to be pitiable or brutal, as the case may be, as if the real function of the Church did not lie beyond organization, in the comfort of the Word and of the sacraments which she provides in good and bad days alike. Those who really believe do not attribute too much importance to the struggle for the reform of ecclesiastical ritual. They live on what the Church always is; and if one wants to know what the Church really is one must go to them. For the Church is most present not where organizing, reforming and governing are going on but in those who simply believe and receive from her the gift of faith that is life to them.
This does not mean that everything must be left undisturbed and endured as it is. Endurance can also be a highly active process, a struggle to make the Church herself more and more that which supports and endures. After all, the Church does not live otherwise than in us; she lives from the struggle of the unholy to attain holiness, just as of course this struggle lives from the gift of God, without which it could not exist. But this effort only becomes fruitful and constructive if it is inspired by the spirit of forbearance, by real love.
And here we have arrived at the criterion by which that critical struggle for better holiness must always be judged, a criterion that is not only not in contradiction with forbearance but is demanded by it. This criterion is constructiveness. A bitterness that only destroys stands self-condemned. A slammed door can, it is true, become a sign that shakes up those inside. But the idea that one can do more constructive work in isolation than in fellowship with others is just as much of an illusion as the notion of a Church of "holy people" instead of a "holy Church" that is holy because the Lord bestows holiness on her as a quite unmerited gift."
- Joseph Ratzinger, "Introduction to Christianity" (1968)