Euro 2012: Will Poland’s economy benefit from hosting a European Championship?

by Kane Prior

Poland will co-host Euro 2012 (the third largest sporting event in the world) with Ukraine this summer and it will be a fitting reward for one of Europe’s rising economies.

The country can boast the fastest growth in the EU and benefits from being the neighbour of Europe’s biggest economy, Germany. Poland also has very low production costs, boosting its industry and unemployment – at a 5 year low – and allowing them to become an exporter to the ever more demanding German public.

This is why Poland’s partnership with Germany has been a huge benefit recently; as while other nations like Spain and Greece have overspent and are now facing crippling austerity, Germany has been frugal since the early 2000s. This means Germany can now borrow at record low interest rates that the EU provides, allowing a lot of extra cash to flow around the German economy waiting to be spent.

Poland (while nowhere near Germany’s low borrowing costs) can actually borrow at a lower cost than Spain or Italy right now, showing the contrasting directions these countries are heading in. As the table below shows, good growth is forecasted by the IMF post-Euro 2012:

Euro 2012 how will it affect Polish economy

Poland is set to experience good growth after Euro 2012 according to IMF projections

But the question is will Poland benefit from the tournament and there are many factors to consider when answering this.

Tourism

First there is the tourism factor. Unlike countries like Portugal (who hosted Euro 2004) Poland doesn’t have a big tourist industry, so a big influx of visitors to the country could have a big effect on the economy.

With countries that already receive a lot of visitors a sporting event can just end up replacing a lot of the original tourists with sporting fans, leaving no major bonus to the country. For Poland, between 700,000 and 1.5 million people are expected to enter the country this summer, a huge source of potential income for local businesses and trade, while the positive advertising of Poland in foreign states could leave long term benefits to the country’s future tourism sector.

Local hotels are already looking to exploit this event by charging premium prices for the selected dates of the tournament, though this could backfire as a lot of hotels are far from booked up, perhaps showing some tourists might have been put off by the high prices (though these are nothing compared to hotel prices in Ukraine).

Hotels aren’t the only businesses looking to exploit the experience, with a well known problem of international sporting events being that prices in general rise but fail to fall back to normal levels in the years afterwards. Also, unlike in Portugal again, Poland isn’t a country that will attract a lot of tourists after this summer, whereas Portugal was able to experience a 5% increase in tourism annually in the years after 2004 due to its attractive qualities e.g. beaches, weather etc.

Stadia

Another factor to consider is the new stadiums that have been built for this tournament. Poland celebrated the opening of their new national stadium in Warsaw in January with a free music and fireworks display. This is the biggest stadium in Poland now (58,500 seats) and will be the symbol of a legacy that Poland will hope to create.

This was accompanied by two other new stadiums in Gdansk and Wroclaw and some refurbishment of existing stadiums. These new stadiums have been built at the expense of the government with €318 million expected to have been spent by the Polish government on their new National stadium.

This is a large amount for a stadium that will rarely see much action after the tournament and could become a relic of the Euros, though its opening night show perhaps showed the different functions that the stadium could provide. The continued costs of maintaining the stadiums will need this to happen; otherwise they could fast become a drag on the Polish economy.

Construction boom

Accompanied with the stadium building was a construction boom that was supposed to boost the economy. This has backfired somewhat for investors, as the Polish government awarded construction contracts to the lowest bidder under the public procurement law, which has lead to fierce competition driving down the prices to below acceptable levels for companies (with some prices reported at 50% lower than the government had originally offered).

These companies found they couldn’t finish the projects they had started and the government had to quickly search for new companies to finish the construction plans, a disaster from beginning to end. However it has lead to almost €22 billion being spent on infrastructure projects like new roads, railways and airports.

This is important for the Polish economy, as they lack the modern transport facilities to really progress as a country and although these projects would have invariably been completed without the tournament, the European Championships has accelerated the process.

These construction plans have involved modernising eight airports so that they are ready for the big influx of fans into the country and also finally creating a motorway system to connect all the major cities, an important feature that was surprisingly missing from the country.

There is worry for Poland after the tournament however, as the motivation for the construction boom will wane without the focus of the government and pressure from foreign bodies. The €67 billion Poland was awarded in the current EU budget will also most likely see a cut next year without the importance of an international event backing up their claim.

Similar private investments estimated at €20 billion could go also decline without the returns of an international backed event attracting investors (though there is hope this will be a more a long term investment in the country).

Poland Euro 2012 investments will it benefit the country economically

Overlook on the Euro 2012 investments in Poland and Ukraine (source: www.pmrpublications.com)

On the field

Poland’s national team won’t face the same pressure as Brazil will face in two years time either, with hopes kept realistic by past performances. The team is sprinkled with talent in the shape of some key players from Borussia Dortmund’s title winning side and the outspoken goalkeeper Wojciech Szczesny who helped Arsenal to a third place finish.

The national team has a good chance of reaching the quarter finals after being drawn in arguably the weakest group of the tournament, but most fans will just be happy they are featuring after missing out on qualification for the last World Cup. Although after a lack of success from hosts in recent international sporting events (South Africa, Austria and Switzerland all failed to get out of their groups), it would be nice to see either Poland or Ukraine achieve some success this year.

Summary

So will Poland benefit from hosting Euro 2012 this summer? Though there are some obvious costs, the international event should boost the Polish economy at a crucial time, with a 2% increase in growth expected in the years afterwards. The improvements in infrastructure have been a long time coming, while the stadiums should continue to produce the occasional revenue and unlike in Brazil (who will host the next World Cup) the stadiums were not built in areas with a lesser football presence.

The hosting of the tournament with Ukraine has also shared the burden and pressure, while Ukraine’s bad antics have seen Poland’s positive attributes shine through in the last few months. In fact Poland is exactly the sort of country that the European Championships could benefit, a nation with big potential that just needs some focus to modernise its economy.

No matter what happens this will be a momentous point in Poland’s history, as the first major international event they have hosted and as the first time UEFA has chosen one of the ex-Communist states of Europe as its candidate.

Kane Prior is a new columnist for Just Football and runs the blog Economic Interests. Follow him on Twitter @econinterests

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4 Responses to “Euro 2012: Will Poland’s economy benefit from hosting a European Championship?”

  1. Jonathan F
    June 7, 2012 at 10:22 pm #

    A truly superb article. The new national stadium looks extremely impressive, so hopefully the infrastructure generally can cope and improve from here. Welcome to the team Kane! :)

    • kaneprior
      June 7, 2012 at 10:31 pm #

      Thanks :) It really does, Wembley tends to look very average to me when you look at the stadiums around Europe. I’m glad to have contributed and hope to keep up the standard.

      I have to add it is a very good website.

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