Just for Fun

The World Cup soccer fever which swept Germany last summer had no meaningful effect for the overall economy, according to a report released this week by the German Institute for Economic Research (DIW).

Although consumer spending increased in the second half of last year, this was due mainly to the increase of the value-added tax on goods and services from 16 to 19 percent, which took effect on Jan. 1, 2006.

The authors of the report, Karl Brenke and Gert Wagner, who conducted a statistical analysis, said that the expectation the World Cup would significantly increase spending, were overly exaggerated.

"The World Cup's contribution to economic growth has been negligible. It was great fun. Nothing more, nothing less," said Wagner, the institute's research director of social risk management.

Problem filtering out single economic impact

Separating out the economic effects of a mega sports events from other business trends is problematic, said sports economist Markus Kurscheidt of the University of Bochum.

"One has to be able to statistically filter other variables to determine the sole effect of the World Cup," said Kurscheidt.

Only one thing remains clear: from 2002 to 2005, the infrastructure and promotion costs in hosting the big event boosted overall economic performance by barely 0.2 percent or at most 0.7 percent.

Not surprisingly, the main beneficiaries of the World Cup largesse was FIFA, the international soccer federation, and the German Soccer Association DFB, which cashed in 187 million euros ($254 million) and 21 million euros respectively. The restaurant industry, where bars and outdoor cafes broadcast the live games, profited handsomely, although the sunny skies also boosted public viewing on huge projection screens.

Boost for beer consumption and hotel bookings

The World Cup no doubt helped push up beer consumption in Germany. Overall, Germans consumed a total of 92 million hectolitres (2.43 billion gallons) of beer, which was 0.5 million more than in 2005, according to the Federal Statistics Office. It was the first annual increase since 1999 following a declining trend in imbibing the golden ale.

Domestic and foreign tourists coming for the games also spent 500 million euros on goods and services, and temporarily boosted occupancy rates in hotels.

But the amount still fell far short of expectations. Germany's Postbank, one the World Cup's national sponsors, predicted a boost of up to 10 billion euros for the economy and 10,000 more long-term jobs created.

Wagner suggested that any positive financial outcome is tainted by perception.

"Whoever expected to make profits would naturally want to attribute overall growth to the effects of the World Cup," said Wagner.

Sports economist Kurscheidt was even more critical in his analysis.

"Before the 2002 soccer games in Japan and South Korea, big profit figures were floated around. The World Cup was supposed to overhaul the economies of whole countries," he said.

A month of partying

Both the DIW and Kurscheidt already had low expectations before the 2006 summer games even took off.

"The direct impetus could not have been so huge. One month of partying can't be a rainmaker for the entire year. Though that doesn't necessarily mean that it had no effect whatsoever," said Kurscheidt.

The most important outcome of a great sports event on the scale of an Olympics or World Cup is its public relations value, he added.

"And there we had tremendous luck: Spanish weather, Brazilian atmosphere, and the concept of the fan mile. It couldn't have been better."