In the Avinida de Concha Espana, the tall fellow wearing an Italian flag raised high his bamboo staff with red, white and green strips of paper taped to the ends. This paisano wore a toy trophy on a string attached to his ear. He carried a trumpet. Six hours before Italy would defeat West Germany, 3-1, for the world soccer championship, 100 people with "Forza Italia" written on their faces gathered outside the stadium to hear him.

Mysterious chanting.

A song sung softly.

Vaguely understood words.

Then, from the crowd, laughter so giddy that an American sought out a young man and said, "Huh?"

"He make funny," said Tagliabue Cesare, 20, of Milan, who drove 950 miles in 20 hours to be here. "He imitate the Pope. He say bless Graziani's body. He say if win he make Rossi cardinal."

Paolo Rossi probably shouldn't go to the bank with this, but eight hours later Italy had won the World Cup. And high in the gathering dark, there sparkled the words in scoreboard lights, "Su Majistad El Rey De Espana Entregas El Trofeo De Campeon." King Juan Carlos of Spain handed over the gold trophy--a soccer player hefting the globe in triumph--to Italy's venerable goalkeeper, Dino Zoff.

"Campeo Mundial 1982--Italia," the lights said. Italy's national soccer team--the American sports equivalent would be an NFL all-star team playing in a world tournament--became the World Cup champion a third time. An estimated 1.5 billion people saw it on television, along with 95,000 in Madrid's Santiago Bernabeu Stadium. At the end, with Zoff in front, Italy's players trotted around the field's edges, holding the gold trophy high for all the paisanos to share.

Every step set off a thousand flashbulbs, the lights dancing between the Italian flags that waved from every corner of the stadium. The Italian wearing a lamp shade kissed the Italian wearing a scuba mask.

"Eee-tal-ya . . . Eee-tal-ya," the fans chanted, and soon enough the Italian coach, Enzo Bearzot, once denigrated as a defensive-minded plodder, smiled and raised his pipe in acknowledgement of applause from Italy's president, Sandro Pertini, who sat near King Juan Carlos, West German Chancellor Helmut Schmidt and that old German goalkeeper, Henry Kissinger.

A sign carried by a fellow whose face was painted in the red, white and green stripes of the Italian flag said, "1934, 1938, 1982 Madrid." "Grazie, Azzurri." Thanks, Blues. In the blue shirts of soccer fame, these Italians surprised the world this week, first by beating the mighty Brazilians and then dominating West Germany tonight.

The ersatz pope did no good for Francesco Graziani, who left the game early with yet another injury, but he did no harm to Rossi's ambition. Rossi scored all the Italians' goals in the 3-2 upset of Brazil this week (a defeat, by the way, which encouraged someone to send a coffin to the home of the Brazil coach). Then Rossi scored both goals in a 2-0 semifinal victory over Poland.

"Rossi, de ex convicto a mito," said a Spanish headline this week. From convict to myth. Never was the laundryman's son from Santa Lucia di Pratoa a convict. He was suspended from soccer two years after being accused of taking part in a gambling scandal. He was never prosecuted by the law. A myth, though, he has become at age 26.

Another goal tonight, his sixth in the three games that redeemed Italy's disappointment of 1978, when it finished fourth in the World Cup, may have earned Rossi a raise in his estimated $400,000 a year salary.

Rossi's goal broke a scoreless tie 16 minutes into the second half. As Claudio Gentile made a perfect centering pass after getting the ball off a free kick, here came Rossi flying toward the goal, stride for stride with teammate Bruno Conti. No more than three feet in front of Harald Schumacher, the goalkeeper, Rossi headed Gentile's pass into the net for a 1-0 lead.

Only 13 minutes later, it was 2-0. By now the West Germans, who had played 30 overtime minutes to beat France on Thursday, clearly were exhausted. Italy's second goal came on a straight-on kick from 25 yards out by Marco Tardelli, who, although in scoring position, was not covered by a defender.

That was that.

The West Germans were done, as, in fact, one of their loyal fans had predicted they would be done. One of the 2,000 or so police here with dogs, rifles, horses and machine guns to guard against a terrorist attack raised his weapon against Fritz Hackenburg, 63, a retired machinist from Gross-Umstadt, West Germany.

Hackenburg tried to get into the stadium carrying a tree branch whittled into the shape of Karl-Heinz Rummenigge, the West German star. The branch, cut from ash, is six feet long and painted in the black, white and gold of Rummenigge's team. It is one of 20 such branches Hackenburg keeps in a special room at home.

"Is okay," he said of the guard's turning him away. "They are afraid I will hit somebody with it. I will leave it outside. But he should not worry. We Germans are more quiet than the Italians. We have had, against France, our luck already. We will be too tired today."

Four American college students from California's Fresno State, backpacking across Europe this summer, testified to the staying power of Italian fans, if not Rossi and Graziani.

"The Italians party all night," said Mark LaScola, 26. "They're nuts."

He said this admiringly, with nods fom his buddies, Mark Magdaleno, Casey See and Andrew Vanderford, who said his greatest ambition was to have his mother see his "Hi U.S.A." banner on TV and know it was code for "Hi, Mom, send money."

The World Cup or the Super Bowl, some things never change.