German economic boom thanks to World Cup

BERLIN - A buoyant World Cup atmosphere and Germany's unexpected sporting success made the nation's households feel richer, helping to spark the strongest economic growth in six years, a researcher said today.

Thomas Dohmen, senior research associate at Bonn University, said a representative survey of 3,200 people during and after the World Cup found the soccer tournament had a lasting psychological impact on consumers in Europe's largest economy.

"The 'World Cup effect' was far more pronounced than we had anticipated," Dohmen said.

"It made everyone feel richer than they were. They stopped saving for rainy days and spent more because they felt the economy was suddenly in better shape."

The researchers calculated that all 39 million German households now "feel" they have an extra 500 euros income each month because of Germany's good run at the World Cup -- totalling nearly 20 billion euros per month.

The perceived effect on income was calculated using mathematical formulae to measure how the tournament changed people's views on the German economy and their own situation.

"It's a staggering amount," Dohmen told Reuters in an interview. He said the effect would have disappeared if Germany had been knocked out early in the tournament.

Instead, Germany made it to the semi-final and finished third out of the 32 teams despite being ranked only 19th.

"All of a sudden, people across Germany started viewing their own personal economic situation better than they did before the tournament began," Dohmen said. "They felt wealthier and were ready to consume more."

Big investment decisions were also made during the euphoria surrounding the soccer tournament, he said. Company investment has been a key driver of German growth this year.

The German government will raise its economic growth forecast for 2006 this week to 2.3 per cent from a 1.6 per cent estimate made before the June tournament that brought millions of Germans into the streets for public viewing parties.

If confirmed, that would be the economy's best performance since 3.2 per cent in 2000, ending a long period of stagnation.

Dohmen rejected the idea that consumers are just bringing forward purchases to avoid a 3 percentage point rise in value-added tax in 2007.

He also said the World Cup itself had only a minimal impact on the economy: a few thousand jobs, most temporary, were created and more than two million tourists came to Germany.

"This feeling of wealth that people have is not rational and has nothing to do with soccer," Dohmen said.

"Instead, it's like suddenly people believe the economy is picking up. You can see now that the World Cup triggered it."

- REUTERS