IE 11 is not supported. For an optimal experience visit our site on another browser.

Italy hopes World Cup win can boost economy

Italy’s win in the World Cup final is being hailed not only as a sports triumph but as a possible way to boost the country’s sluggish economy.
/ Source: The Associated Press

Italy’s win in the World Cup final is being hailed not only as a sports triumph but as a possible way to boost the country’s sluggish economy.

Sunday’s 5-3 victory over France in a penalty shootout could allow Italy to ease up on planned budget cuts by boosting consumer confidence and increasing gross domestic product, government officials said.

“We can certainly say it’s worth more than half a point of GDP” said Economics Undersecretary Mario Lettieri, though he conceded, “we cannot make an exact prediction.”

Effects from the morale boost appeared to be felt on the stock market, where top teams in the wake of a match-fixing scandal in recent weeks had taken a beating, particularly Juventus, once Italy’s blue chip soccer club and the major league champion in the last two seasons.

The Agnelli family, of the Fiat SPA car empire, owns a controlling stake in Juventus, which risks demotion from Serie A along with three other clubs. On Monday, the team’s stock was up 5.7 percent at the end of the day.

Milan stock exchange authorities have regularly suspended Juventus stock from trading to stop a freefall that saw the value tumble 30 percent at one point.

High hopes for the effects of the victory also come from the European Union on Monday.

“We all congratulate Italy for its sterling performance,” said Amelia Torres, spokeswoman for EU Monetary Affairs Commissioner Joaquin Almunia. “We certainly hope this victory will give a boost to the economic performance.”

The Italian government last month approved interim budget measures worth 7 billion euros ($8.8 billion) as a step toward keeping the country’s pledge to the European Union to get the deficit below 3 percent of GDP by 2007.

The measures, which would raise money by fighting tax evasion and keeping spending under control, are only the first in a series of cuts worth about 42 billion euros ($53.7 billion).

Even before Italy clinched the title, Deputy Economics Minister Vincenzo Visco said a victory would boost GDP and consumer confidence and could mean the budget cuts would be lighter.

“The interim budget measures will still be necessary, but maybe it will be smaller,” Visco said in a radio interview last week after the Azzurri had beaten Germany to advance to the final. “After the World Cup, people spend more. They become more optimistic.”

But some analysts warned there is little evidence of such an effect.

On average, countries that win the World Cup grow less in the year of their victory than in the previous and successive one, economist Tito Boeri wrote in Turin-based La Stampa. Their GDP growth is usually lower than that of the country defeated in the final, Boeri wrote.

If anything, the victory of the no-frills national squad will provide politicians with a role model to present Italians with as they fall on hard times, he wrote.

“We’ll need this victory to face with the right spirit a very difficult phase, remaining united and creating a group just like we did at the World Cup in Germany.”

Premier Romano Prodi also said that any effects remain to be seen.

“I don’t know how it will influence GDP,” Prodi told La Repubblica daily. “But a billion and a half people have seen Italy win.”

One company that may not be overjoyed is electronics chain Media World, which promised customers who bought a new TV that they would receive coupons for other merchandise if Italy won the World Cup.

Some 10,000 people qualify to receive about 10 million euros ($12.7 million) worth of coupons, said Sara Milazzo, a spokeswoman for Mediamarket, the retailer’s holding company.

The company says it will be able to pay up thanks to insurance it took out for the promotion.

“It’s a calculated risk,” Milazzo said. “We were all rooting for Italy.”