Wednesday, December 1, 2010

Hosting 2018 World Cup will not save Europe's economy

ZURICH: Struggling European economies competing to host the 2018 might battle to pay for the investment needed in new stadiums and infrastructure and should not bank on too much of a boost to state coffers, according to a Reuters report on Wednesday, Dec 1, which quoted analysts.

FIFA will choose the host nations for the 2018 and 2022 World Cups in Zurich on Thursday. The 2018 hopefuls are England, Russia and joint bids from Spain and Portugal and the Netherlands and Belgium, while Australia, Japan, Qatar, South Korea, United States are in the running for 2022.

As Europe battles with a debt crisis and tries to rein in government spending, the 2018 host will hope for a windfall from the world's biggest sporting event and could see their sagging CONSTRUCTION [] industries benefiting in coming years.

"The question is whether the hosts can finance it. The World Cup will not save your economy. It is a legitimate question because much of the money typically comes from public finances," said Stefan Chatrath, sports economist at the Iserlohn Business and Information TECHNOLOGY [] School in Germany.

England expects to need to pay $2.5 billion on stadiums, the Netherlands and Belgium are budgeting $2.4 billion for stadium construction and renovation, Spain and Portugal would spend almost $2 billion, while Russia would have to build 13 stadiums from scratch for a projected $3.8 billion.

"You can spend billions of dollars on prestige projects. The economic effects can be marginal. It is more a signal to the world," Chatrath said, adding the host also has to cover heavy security costs that can run into billions of dollars.

John Sfakianakis, Chief Economist at Banque Saudi Fransi in Riyadh said already booming Qatar was unlikely to benefit much: "It might even have a negative financial benefit as it might push Qatar into more construction that might prove unnecessary."



Placido Rodriguez, a professor of economics at Oviedo University and a former chairman of La Liga club Sporting Gijon, said the Spanish government could not afford the political cost of failing to push through the main infrastructure project linked to its bid, a high-speed train link with Portugal.

He dismissed suggestions that Spain and Portugal might find it hard to pay for the tournament as government borrowing costs have soared on concerns their high deficits could force them to follow Greece and Ireland in seeking a financial bailout.

"Spain and Portugal would also get a boost to their gross domestic product, even if it would only be a small one as FIFA takes the lion's share," said Rodriguez, who has written an official study assessing the impact of hosting the World Cup.

Chatrath said the smaller the economy the bigger the likely impact from hosting the tournament. While Germany's economy only got a boost of about 0.5 percent in 2006, South Korea's saw a 2.2 percent surge from its joint hosting with Japan in 2002 and 2010 hosts South Africa grew 1 percent faster this year.

England says the World Cup could bring in 3 billion pounds, but Paul Downward, senior lecturer at Loughborough University's School of Sport, Exercise and Health Sciences, said costs will come under close scrutiny in the current economic climate especially due to over-runs for the 2012 London Olympics.

"Most of the academic evidence would suggest that public investment doesn't always produce the sort of returns that are promised in the first instance," he said. "We are working in fiscal austerity. We don't know what's going to happen across Europe: there are certainly going to be squeezes."

Meanwhile, cash-strapped governments should not expect too much of a boost to state coffers if they win as FIFA demands tax exemptions from hosting countries, a fact which prompted a storm of criticism in the Netherlands earlier this year when the government published usually confidential details of its bid.

"Do we want in the current socioeconomic situation to spend scarce government funds on a wildly expensive World Cup?" sports expert Bart Vanreusel from the Catholic University of Leuven said in an opinion piece in Belgium's De Standaard.

"The costs of the football tournament are out of proportion to any sustainable national well-being." - Reuters

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