Pope Benedict XVI said in his Christmas Eve mass on Monday that religion can be corrupted, leading to violence and wars, but refuted critics who claim that denying God's existence would lead to peace.
"It is true that religion can become corrupted... when people think they have to take God’s cause into their own hands, making God into their private property," the pope told thousands gathered in Saint Peter's basilica.
"Monotheism, belief in one God, is said to be arrogance, a cause of intolerance, because by its nature, with its claim to possess the sole truth, it seeks to impose itself on everyone," Benedict said.
However, "while there is no denying a certain misuse of religion in history, yet it is not true that denial of God would lead to peace," he added.
"Down the centuries, while there has been misuse of religion, it is also true that forces of reconciliation and goodness have constantly sprung up from faith in the God," said Benedict, whose campaign against religious violence is one of the cornerstones of his papacy.
The spiritual leader of the world's 1.1 billion Roman Catholics also said that the speed of modern life left no time for God, and called on the faithful to make "room at the inn" for the world's poor and suffering.
"I am repeatedly struck by the Gospel writer's almost casual remark that there was no room for them at the inn," he said in reference to the story of Christ's birth in a stable because Mary and Joseph could find no other refuge.
"Inevitably the question arises, what would happen if Mary and Joseph were to knock at my door. Would there be room for them?" the 85-year-old said.
"Do we not actually turn away God himself? There is no room for him. Not even in our feelings and desires is there any room for him," he said, blaming modern society's obsession with speed and personal ambition.
"The faster we can move, the more efficient our time-saving appliances become, the less time we have. And God? The question of God never seems urgent. Our time is already completely full," the German-born Benedict said.
"We want ourselves. We want what we can seize hold of, we want happiness that is within our reach, we want our plans and purposes to succeed.
"We are so 'full' of ourselves that there is no room left for God. And that means there is no room for others either, for children, for the poor, for the stranger," he added, calling for people to also rethink their attitudes towards "the homeless, towards refugees and migrants."
Benedict called for peace in the town of Christ's birth, Bethlehem, "and all those places where the Lord lived, ministered and suffered."
"Let us pray at this time for the people who live and suffer there today. Let us pray that there may be peace in that land," he said.
"Let us pray that Israelis and Palestinians may be able to live their lives in the peace of the one God and in freedom," he added.
The pontiff prayed for Lebanon, Syria, Iraq and neighbouring countries, "that there may be peace there, that Christians in those lands where our faith was born may be able to continue living there, that Christians and Muslims may build up their countries side by side in God’s peace.