- The Washington Times - Tuesday, July 20, 2010

It’s been more than a week since Spain won the World Cup, and the Spanish Institute of Tourism is still celebrating: “Ole! ole! ole!”

The office boasts on its U.S.-aimed website an image of the team members in a huddle as they celebrate their 1-0 victory over the Netherlands.

“This sort of success helps a great deal in improving the mood of the people,” said Paloma Notario-Bodelon, director of the institute’s New York office. “I am sure that a more optimistic and positive attitude helps us to believe that we can achieve our goals in whatever we need to do, gives a sense of being part of a team, and helps to bear the severe measures implemented.”

Whether it’s by raising national spirits and boosting consumer spending or by helping trade and tourism by raising the country’s international profile, Spain hopes to cash in on the triumph in South Africa by “la furia roja,” a burst of good news for a country whose economy is reeling under a mountain of debt.

While a World Cup victory doesn’t rank alongside fiscal stimulus, tax cuts or lower interest rates in boosting an economy in the long run, some analysts note a short-term economic bounce from a World Cup victory and past world soccer champions have experienced a “World Cup effect” of 0.7 percent growth for the year.

“We are convinced that soccer has an impact on the economy and therefore justifies some research effort. The effects at macro-economic level and on the financial markets are not so great that they can turn a recession into a boom, but they should not be underestimated. Past figures show, for instance, that … a World Cup winner enjoys an average economic bonus of 0.7% additional growth, while the losing finalist suffers an average loss of 0.3% compared to the previous year,” wrote Ruben van Leeuwen and Charles Kalshoven, economists with the Dutch bank ABN AMRO, in the 2006 report “Soccernomics.”

Mired in its worst recession in decades, with the economy contracting by 4 percent in 2009 and the government predicting a further pullback of 0.3 percent in 2010, Spain certainly could use such a lift.

At 20 percent, Spain’s unemployment rate ranks highest in the 16-nation eurozone, after a decade-long boom in which gross domestic product ballooned to $1.86 trillion in 2008. But now Spain faces a housing market crisis, credit rating downgrades, subway strikes and a hamstrung government. The socialist government in Madrid had to introduce tough austerity measures, including wage cuts for public-sector workers, to avert a debt-caused economic collapse.

But if recent numbers for the victorious countries in recent World Cups are any indication, Spain may make an economic comeback. Argentina, the 1986 World Cup winner, recorded a stunning 7.1 percent economic growth rate for that year. In 1990, Germany posted a 5.7 percent growth rate.

Brazil’s two World Cup victories coincided with upsurges of 5.9 percent (1994) and 2.7 percent growth (2002). Although the 2002 figure may look unimpressive, it reversed a recession and began a series of strong figures that, by 2008, had increased the nation’s GDP to $1.58 trillion. According to the Euromonitor International archive, since 2003, Brazil’s unemployment rate has fallen amid stronger economic and employment growth.

Italy, world champions in 2006, posted a 2 percent economic growth rate for the rest of the year, and its GDP increased more than $250 billion from 2006 to 2007. Its tourism receipts rose from $38.3 billion to $42.7 billion.

Spain hopes this trend continues.

“It generates confidence in our country, here and abroad, and that will also be good for GDP,” Spanish Finance and Economy Minister Elena Salgado said in a statement, adding that the World Cup “is good” for the country.

Jose Maria Romero, senior consultant at Madrid-based consultancy Equipo Economico, said, “It will most probably be beneficial for tourism thanks to the positive effect on the Spanish brand.”

Ms. Notario-Bodelon said the tourism office launched an advertising campaign the day after the final, featuring ads in daily newspapers in 25 countries, and received 35.1 million hits on YouTube and 49.4 million hits on Facebook.

Mr. Romero said long-term economic reforms are necessary to revive Spain’s economy but noted the “positive effect on consumption of certain products.”

Besides the immediate increase in consumer spending at home on beer, souvenirs and other symbolic items, a psychological factor is involved and creates economic ripples.

On the day after the Spanish team’s triumph, the front-page headline on Madrid’s El Pais newspaper, the nation’s largest, read, “World champions: an ode to happiness.” Spanish goalkeeper Iker Casillas also mentioned the economic woes and said he hoped the team’s victory would raise the spirits of his countrymen.

“Many people are having a bad time because of the crisis and this is a tremendous joy that makes us forget everything around us,” Mr. Casillas said in an interview with Radio Marca. “I am a privileged person, but I have family and friends and I know what people are going through.”

Spain’s economic challenges are so daunting that other economists, while acknowledging the psychological boost, are skeptical about any effects on the economy.

“There’s no basis for a World Cup victory to have an impact on economy,” said Andrew Zimbalist, a professor of economics at Smith College. “I think it’s a terrific psychic boost for Spain, and it’s good to have during the recession, but the notion that this will turn into an economic lift is fanciful.”

Stefan Szymanski, a professor of economics at City University of London, agreed.

“There’s not much economic logic to the idea of a World Cup winning economic effect,” Mr. Szymanski said. “Sure, the Spaniards feel great right now, but they are partying and not doing any work, so this is negative for GDP. Will people work harder in the longer term? This is just one event in people’s lives, however important, so this seems a tenuous link.”

Ms. Notario-Bodelon downplayed the scholarly skepticism.

“I do not understand those critics because neither our government or media or any significant representative of our economy have ever implied the idea that Spain’s victory was going to solve the effects of the global crisis in our country. However, it is also proved that this sort of success helps a great deal in improving the mood of the people,” she said.

Charles Kenny, a senior economist at the World Bank, said such an analysis with doubtful correlations is unscientific.

“As background for an event at the New America Foundation, I did some tongue-in-cheek analysis which looked at World Cup winner country economic performance compared to the global average five years before and five years after their win over the past 40 years or so. On average, World Cup winners grew more slowly than the global average in both periods — from an economic perspective, tai chi may be the better national sport,” he said.

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