“World champions! World champions! World champions!”. Nando Martellini’s shout still echoes today through more than forty years of history. It is July 11, 1982. At the Santiago Bernabéu in Madrid, Italy has just defeated West Germany 3-1. Paolo Rossi runs towards midfield, Marco Tardelli shouts all his joy, Sandro Pertini cheers in the stands. Italy is world champion.
The next day, however, Italians wake up in a country very different from the one portrayed by the images of the final. Inflation is still running above 16%. Just two years earlier it had exceeded 21%. Interest rates are in double digits, mortgages seem prohibitive, and the lira continues to lose purchasing power. The battle against inflation is far from won.
Yet, that was not the first time a World Cup was played against the backdrop of a major price crisis. If you think about it, just move away from the Bernabéu and go back eight years.
FROM THE OIL SHOCK TO STAGFLATION: THE GERMAN RESPONSE
On one side is Johan Cruijff’s Netherlands, the prophet of total football. On the other, Franz Beckenbauer, the Kaiser. Genius against order. Imagination against discipline. It ends 2-1 for the Germans.
While Beckenbauer lifts the World Cup in front of the home crowd, outside the stadiums the world is facing a challenge far more complicated than any final.
A few months earlier, the first oil shock had shaken the global economy. Between 1973 and 1974 the price of oil nearly quadrupled. Cars lined up at gas stations. Car-free Sundays became a reality in many European countries. Bills increased. Prices ran. Inflation in those years exceeded 11% in the United States, approached 20% in Italy, and neared 17% in the United Kingdom. Economists, for the first time, faced an opponent they had never really confronted before. The economy slowed down, but prices kept rising. A combination that seemed impossible. They called it stagflation.
In that context, Germany chose its strategy: discipline, rigor, patience. In those years the Bundesbank accepted sacrificing part of economic growth in order to bring prices under control. An unpopular choice in the short term but decisive in the following years. By the end of the decade German inflation had fallen below 5%, while much of the Western world continued to chase the opponent.
In other words, the Bundesbank in those years decided to play just like Beckenbauer. Control of the field, few concessions, and a long-term vision.
Four years later the World Cup moved to the other side of the ocean.
ARGENTINA 1978: INFLATION AND STRUCTURAL FRAGILITY
Mario Kempes scores twice in the final against the Netherlands. The stands of the Monumental explode. For the first time in its history Argentina is world champion. While the Albiceleste lifts the Cup, however, the country’s economic scoreboard continues to worsen. At that time Argentine inflation was already around 150% annually. It was a symptom of a problem that would not be solved. In the following years the situation would further degenerate, up to the inflation crises that would mark entire generations of Argentines. The lesson is simple. Winning a World Cup requires talent. Beating inflation requires credibility. It was then that one of the most important protagonists of this story entered the field. Not a striker, not a playmaker, not even a world champion.
In 1979 Paul Volcker took over the Federal Reserve. Almost two meters tall, cigar always lit, and a character little inclined to compromise, Volcker chose a strategy many considered impossible: drastically raising interest rates.
Within a few months, the cost of money in the United States exceeded 20%. The cure was painful. The economy slowed. Unemployment rose and protests were not lacking. It took time, but the cure worked. When Volcker took office, American inflation was close to 14%. By 1983 it had fallen below 4%. In a way, he was like a coach willing to give up the show in order to win the game.
Days pass, years too. While Volcker fights his battle against inflation, summer 1982 arrives. The summer of Paolo Rossi. The summer of the Bernabéu. The summer of Martellini.
Italy wins the World Cup but has not yet won its economic battle. Inflation remains above 16% and it will take years of restrictive monetary policies, sacrifices, and fiscal discipline before the problem is truly reduced. It is a lesson that football teaches well. Winning a final does not mean having solved all problems.
For almost forty years, however, inflation disappeared from the radar of major advanced economies. It seems like an old black and white recording. A problem belonging to the stories of our parents. A story that seemed linked only to those who really remembered that night at the Bernabeu. Those who shouted in front of the TV with Martellini.
2022: THE RETURN OF GLOBAL INFLATION
First the pandemic. Then bottlenecks in supply chains. Then the war in Ukraine. Then the energy crisis. For the first time since the 1980s inflation returns to the front pages of newspapers. In the United States it reaches 9.1%. In the Eurozone it exceeds 10%. In the United Kingdom it hits 11%. In Italy it approaches 12%. Curiously, just like in 1978, Argentina won the World Cup once again. This time led by Lionel Messi. While Messi lifts the World Cup in Lusail, the main central banks of the planet are completing the most aggressive rate hike cycle since Volcker’s time.
The Federal Reserve raises rates from nearly zero to over 4% in less than a year. The ECB abandons the era of negative rates. Markets begin to wonder if the medicine will be worse than the disease.
The difference compared to the 1970s, however, is evident. This time the referees of monetary policy see the foul almost immediately. Fed, ECB, and Bank of England react quickly, trying to prevent inflation from becoming entrenched in the expectations of households and businesses.
2026: BETWEEN NORMALIZATION AND GEOPOLITICAL RISK IN GLOBAL MARKETS
For the fourth time in just over half a century, the world finds itself living a World Cup with inflation still among the main economic concerns. But this time the scoreboard tells a different story. In the United States inflation has returned close to 2-3%. In the Eurozone it hovers just above the 2% target set by the ECB. In Italy it is far from the levels that accompanied Paolo Rossi’s triumph in 1982. On paper it would seem a victory. Yet markets continue to question the future. In the 1970s the enemy was oil. In 2022 it was energy and war.
In 2026 risks continue to intertwine with geopolitical tensions. For investors the doubt remains, ultimately, quite simple: how to protect themselves in the short term without giving up growth targets. Interest rates today represent a first line of defense against inflation concerns. Unlike 2022, however, the context has changed: yields exist, no longer starting from zero. This radically changes the starting point. Without necessarily revising growth expectations, at least in the short-term horizon, investors demand to be compensated for political and geopolitical risk.
Curves move relatively in parallel, reflecting the idea that central banks have to do less “dirty work” to build protection: part of the defense is already embedded in current rate levels.
Meanwhile, equities continue to behave resiliently. The scenario, more than an open clash, resembles a midfield waiting phase: a long possession management, made of passing, in which both teams look for the right moment to go vertical.
Investors watch, study, wait for the through ball. News of a possible détente between the United States and Iran seem to cool the climate, opening space for a possible restart: a counterattack that could bring riskier assets back ahead.
It is too early to say who will win the game, but in 1974 Beckenbauer won the final and Germany helped write the monetary discipline manual. In 1978 Kempes won the World Cup but Argentina continued to lose its battle against prices.
In 1982 Paolo Rossi and Italy climbed to the top of the world while Italian inflation was running. In 2022 Messi brought the trophy back to Buenos Aires while central banks launched the toughest monetary tightening in the last forty years. In so much uncertainty, one thing seems certain. World Cups and economies sometimes intertwine their paths. We just have to see who will lift the cup next July 19 and who will be the winners on and off the field.
