Winning the Euros, saving the

29th June 2012

The link between hosting a major sporting event and economic growth is well-established. Countries do not spent millions on bids just for national pride. For example, Polish policymakers believe that Euro 2012 will give the economy a boost:

"Warsaw has invested about $30bn to build stadiums, airports and highways intended to show the rest of the continent that the grey country which emerged from communism two decades ago has been transformed into an increasingly normal European nation.

"What we are hoping for is the so-called Barcelona effect," says Marcin Herra, the head of PL.2012, the government body responsible for organising the tournament, referring to the impact of major sporting events on emerging countries like the 1992 Barcelona Olympics. "If the tournament goes well, Poland will be able to say that we've done some really good work on an enormously complex, long-term task – the most complicated thing we've had to do in our history."

There are certain areas of the economy that benefit disproportionately. All the leisure industries – hotels, restaurants, retailers – stand to gain from the hosting of sporting events. The UK is likely to be a beneficiary of this during the Olympic Games, which is likely to add around 0.2% to GDP. Some go even further:  "The Bank (of England) said it had studied the impact of the Sydney Olympics in 2000 on the Australian economy. The Reserve Bank of Australia estimated the boost to GDP growth that quarter at about 0.75 percentage points."

But that's hosting, not winning. Hosting brings tangible gains, drawing in people with money to spend. The impact of winning a tournament is a more nebulous ‘feel good' effect. However, a dose of positive thinking should not be underestimated: "Howard Archer, chief economist for IHS Global Insight, said the England victory was great news for the economy. He said: "If the national team can keep winning, the upbeat atmosphere generated could bring a significant boost to consumer confidence." The article puts the economic boost at up to £2bn. 

In the UK, retailers such as Sainburys have reported a boost in sales during England's (admittedly short-lived) participation in the European Championships.

So could it do the same for Spain? Although the evidence is shaky, the post-victory economic record of previous winners looks as follows

"Argentina, the 1986 winner, recorded an impressive 7.1 percent of economic growth. Germany (1990) posted 5.7 percent, up 1.8 percent from 3.9 percent the year before. Brazil (1994 and 2002) saw 5.9 percent and 2.7 percent, up 1 and 1.4 percent. And 2006 champion Italy recorded 2 percent growth that year, up 0.66 percent from 2005."

Of course, these are crude figures and other factors may have been at work, but Spain needs all the positive thinking it can muster.

However, Johan pointed out at the time: "Two years ago Spain (had) already won the Tour de France, the European Cup football, Wimbledon and a 15th place in the Olympics medal table. Despite all these successes it did not boost the economy (significantly). So, now (will) things changes because of the success in the World Cup football…? I doubt it…"

It is certainly true that's Spain last victory did little to save its economy from its current parlous condition.

No-one wants a weaker Germany and with yesterday's manufacturing and employment statistics heading lower their Euro 2012 defeat will be a bitter pill to swallow.

Whilst Germany's economic power may be holding the eurozone together at present, a Spain vs. Italy final was probably the best economic result anyone could have hoped for (aside from Greece managing to miraculously recreate their 2004 victory). The eurozone crisis may put many England fans in an unusual position: supporting Germany.

 

More on Mindful Money

The real Euro 2012: the economic championship of Europe

Germany: The eurozone winners

Towards a Brixit

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