Democracy is horrible: secular, man-centered mob-rule.
Theocracy is even worse, however, for it establishes the Church entirely within the State, and marries the State to the Church. This is absolutely horrible, because - despite pious sentiments about baptizing politics - it is always the Church that is corrupted by the state, and not the other way around.
When the state is the church and vice versa, bishops become fat, priests become rich, and the religious are turned into agents of the ministers. The Church is entangled in deceit, treachery, lies, bribery, and corruption. Men are not so strong as to hold back from endless benefices and gifts. The most Catholic countries with an established Church were also creators of the worst evil: France gave us Voltaire, for example, because Voltaire saw the endless corruption of French bishops and thought this discredited the Church. Though he was wrong, it is the common thing that happens to the population in such kingdoms and nations. In this life, theocracy leads to the death of souls, for men are disobedient: clergy and laity alike.
Separation of church and state may be an atheistic communist debating point, but I think even the worst enemies of the church are correct to want separation. It preserves the Church from the horrible influences of the fallen state.