With the Euros kicking off last Friday, the European leg of Taylor Swift's 'Eras Tour' in full swing and growing anticipation ahead of the Summer Olympic Games, starting in just over a month, this summer is clearly one where recreational activity is providing growth opportunities for many European countries.
The label of the "Sick Man of Europe" is commonly used by scholars, politicians, economists, and others to describe a European country facing economic difficulties. Originally coined in the early 1800s to describe the declining Ottoman Empire, this term has recently been increasingly used to describe Germany. The first three months of 2024 marked Germany's second consecutive quarter of economic contraction, with projections for the full year indicating little to no growth. Once an industrial powerhouse, the region now faces challenges as subdued demand and a deglobalising world have stripped away critical advantages such as Chinese exports, affordable Russian gas, and a reliable US security guarantee.
However, despite the country’s current economic challenges, hosting the UEFA Euro 2024 is expected to bring significant economic benefits, particularly to the tourism, hospitality, and retail sectors, with half a million fans expected to travel to the competition from the UK alone.
Major events not only attract large numbers of international visitors but also boost domestic consumption as locals participate in event-related activities. While bids for such events and the necessary infrastructure investments often result in overall losses for host cities and countries, Germany is in a strong position to leverage its experience from hosting the 2006 World Cup. By upgrading the infrastructure already in place from that event, Germany can efficiently support the tournament and secure long-term benefits by attracting future events and tourism, while avoiding the heavy cost burdens of building brand new infrastructure to host such an event.
Elsewhere in Europe, France, a region whose demand-driven economy typically moves in the opposite direction of Germany's, has been struggling to achieve modest growth despite an increasing budget deficit. Last Friday, the Paris stock exchange experienced its worst weekly performance in over two years, as investors grew anxious about France’s looming snap election following the significant gains made by right-wing parties in the recent European elections. This is all taking place just six weeks before they host the Olympics.
Similarly, to Germany, France stands to benefit economically from hosting the upcoming Olympics. Set to begin on July 26th, the event is projected to generate a net economic gain of between €6.7 billion and €11.1 billion for the country’s capital. However, as explained above, the costs associated with hosting such events often make it difficult to achieve a profit. Historically, only one city, Los Angeles in 1984, has made a profit from the Olympics. The challenge lies in the substantial investments required for bidding and building the necessary infrastructure to accommodate the events and the large number of athletes, which often outweighs the financial gains despite the influx of spectators.
In addition to the costs of building the necessary infrastructure, French authorities have spent an additional £1.2 billion to clean up the River Seine. This followed recent test results shared with CNN by the technology company Fluidion, revealing that the Seine still does not meet the World Triathlon's safety standards for swimming due to high levels of E. Coli bacteria, posing significant health risks to athletes. At least now we know it is not just the Thames facing these issues.
It is not just the current sporting events in Europe that are impacting the economy. Many of our readers might have children or grandchildren who have been eagerly anticipating Taylor Swift's arrival in the UK. The 14-time Grammy winner has begun the UK leg of her illustrious ‘Eras Tour’. Studies indicate that this tour is having a surprising yet substantial economic impact, boosting local economies in the cities she visits. Fans flocking to these locations require hotels, dining, and often indulge in shopping before the show. Barclays recently estimated that the tour could add an impressive £1 billion to the British economy. The impact is so significant that the Bank of England (BoE) may delay their anticipated rate cut, scheduled for August, as the economic numbers are bolstered by the effects of her concerts.
All around this summer is turning out to be a summer of recreational activities for Europe, a time for unity while the world feels so divided and a time for very welcome economic growth.
Do have a great weekend.
Comments