Europe's New Deficit Fighter: The Lottery

For nations seeking EMU entry, it's a sure way to raise billions

On Jan. 5, the eve of the Epiphany, Italian children believe that "la Befana," a good witch on a broomstick, will fly into their bedrooms and leave gifts. The next day, adults put their faith in another incarnation of Lady Luck--the biggest state lottery drawing of the year. Would-be winners, eyeing their ticket stubs, sit glued to their televisions waiting for spinning balls to reveal the numbers that will make one of them instantly rich. "Everyone who buys a ticket is hoping for a visit from the millionaire Befana," says 31-year-old Ivan Armenti, who owns a pub in Rome and has been playing the lottery for 15 years.

This year's $3 million winning ticket went to an anonymous player in Padua. But the real winner was the Italian state, which takes in an estimated $2 billion yearly in lottery revenues--and wants more. So do other European nations with national lotteries, including France and Spain. Under pressure to shrink budget deficits as a prerequisite for joining the European Monetary Union, they see lotteries as an easy way to raise revenues without upsetting taxpayers. Lotteries generated $57 billion in sales for European governments in 1996, up 54% from 1992. The governments' nets are roughly a third.

Among the strategies used to boost participation and revenues: more "scratch and win" lottos, more ticket vending locations, sales of TV rights to drawings, and more advertising. In Italy, says Samuele Colombo, a Milan lawyer who specializes in raffles and lotteries, the name of the game now is efficiency. Last year, mechanical and computer snafus cut Italy's revenues by half.

FAST COMPANY. Finance Minister Vincenzo Visco has since pushed for privatization of the mismanaged state monopoly. Potential bidders include Sisal Sport Italia of Milan or the Italian National Olympic Committee, which already run betting pools for soccer and horse racing and number-based raffles. Another possible contender is GTECH Holdings Corp., the giant U.S. supplier of lottery systems. It operates across Europe, including in Britain, where it has a 22% share of Camelot Group, which runs the British lottery.

In many European nations, the focus is on the introduction of more games--especially the popular scratch-and-win instant lottos, says Vittorio Cutrupi, general director of Italy's state monopoly. Later this year, Italians will be able to purchase 70 cents "Bingo" cards with jackpots worth up to $30,000. There is also a planned lottery based on Formula One race results. Similarly, the French are preparing a soccer lotto in time for this summer's World Cup matches.

EARTHQUAKE AID. Where does all the money go? Italy, France, and Spain plug part of their lottery revenues directly into their general-budget ledgers. In Spain, the state will put 30% of last year's $7 billion in proceeds from ticket sales toward its budget. The French government, which owns 72% of the national gaming monopoly, collects 27.7% of lottery revenues in taxes--$1.6 billion last year--in addition to its take as a shareholder.

France applies these funds to such nonprofit programs as the arts as well as the general budget, as do many European countries. French lotteries sponsor a program for up-and-coming athletes. In Italy, a lottery fund was set up to help repair the Basilica of St. Francis in Assisi, destroyed by earthquakes last year. And in Britain, where Camelot runs the largest national lottery in the world, with sales of $7.7 billion in the year ended Mar. 31, some $7.4 billion has gone to good causes over the last four years.

Lotteries are not without their detractors. Apart from the long-running controversy over the evils of gambling, critics blame Britain's lottery for a falloff in traditional giving among individuals. But the picture is different on the Continent, where enthusiasm for lotteries runs high. "It's one of those things in which everyone wins," argues Colombo, the Milan lawyer. In most European capitals, that seems reason enough to keep those drums full of numbers tumbling.