Thursday, 7 June 2012

Euro2012 - Poland's Wasted Investment



‘Bah, Humbug’ I hear you cry. Just as Poland and Ukraine take centre stage in hosting the Euro 2012 football championships yet another negative article is written to spoil the fun. Well let me set one thing straight. I am actually looking forward to Euro2012, that starts this Friday when Poland plays Greece in Warsaw. I like football and I will enjoy the spectacle. Already you can see Warsaw filling up with people of different nationalities and races. This can only be a good thing and takes Poland a step further towards becoming a more open and cosmopolitan country. I also welcome the fact that Poland has embarked on a course of large public investment in its infrastructure in recent years, which as often pointed out in this blog has helped it to repel a recession despite the continuing global economic crisis.

The main point however is not whether the championships will be a success, whether the fans will enjoy themselves or if it will help enhance Poland’s reputation globally. I’m sure all of these things will happen. The major concern is whether Poland has actually wasted large sums of money on investments which could have been wiser spent and some of which could actually have a negative future impact on the country’s economy. 

When it was first announced that Euro2012 would be held in Poland, the government declared a series of planned investments. These included the construction of 900km of motorways and 2,100km of express roads, the modernisation of 1,556km of its railway infrastructure, enlargement of 8 airports and construction or upgrading of 6 football stadiums.

Just prior to the tournament PM Donald Tusk has announced that the government has completed around 80% of its planned investments. Yet experts point out that while the government has largely been successful in carrying out its plans for airports and stadiums, only around 40% of its original planned road and 50% of rail investments have been completed. The government has obviously moved the goalposts (excuse the pun) and now refers to its later more modest plans that had been drawn up once it was clear that it could not meet its original obligations. 

Yet despite these shortcomings one cannot dispute that the Polish government has helped to carry out a series of public investments in its infrastructure at a level not seen since the 1970s. As the head of the government organization (PL.2012) that is coordinating preparations for Euro2012 in Poland has pointed out, during the past four years investments worth ZŁ70bn have been completed. According to their estimates such  a programme would normallyhave taken at least 8 years to complete.

Despite these achievements one fundamental point stands out. In the present EU budget (that runs from 2007 to 2013) Poland has been liable to receive the largest sum in structural and cohesion funds of any EU member state. This equals €67bn, which rises to 82bn once the amount that the Polish government is able to spend on top of this sum is taken into account. Yet, not one extra euro has been made available for Poland’s hosting of Euro2012. This means that a large amount of the EU funds that Poland can gain access to has been spent on preparing for these football championships.

An analysis of the breakdown of investments in preparation for Euro2012 shows that 75% of the money has been spent on the country’s roads and just 11% on railways. Now, there is now doubt that in the country with the highest amount of road accidents inside the EU  that there is a serious need for investment in its road infrastructure. However, this has been done at the expense of a similar programme of investment in the railway network, which is severely underfunded, in disrepair and becoming increasingly unsafe. It is also questionable whether such a large proportion of the country's public investment should have been concentrated in four of the largest and wealthiest cities in the country. 

The building and modernisation of stadiums has meant that Poland now has sports facilities that rival those in other EU countries. However, how viable will it be to maintain these once the tournament has finished? It is hoped that by co-hosting Euro2012 and developing the country’s stadiums that the popularity of football will grow in the country and attendances rise. This may well be true, however presently the amount of people attending football matches in Poland is relatively very low, equalling just 0.17% of the population on match days. As a comparison this reaches 0.35% in the Czech Republic, 0.40% in Italy, 0.47% in Germany, 0.61% in Spain, 0.70% in England, 0.75% in Portugal and (an incredibly high) 1.61% in Scotland. 

The fear exists that after Euro2012 the local governments in cities such as Warsaw, Wrocław and Gdańsk will be left with the responsibility of maintaining stadiums that are under used, bringing a huge financial burden to these local municipalities. This has been the case in Portugal, that hosted the Euros in 2004 and spent over €600m building and developing its stadia. These now often stand ¾ empty during league games and facing its own financial crisis a discussion has opened in Portugal as to whether these stadia should be demolished to ease the pressure on local governments. 


This is not the only financial cost that has been placed on local governments, who have had to invest large sums of public money in preparation for the Euros. In cities such as Gdańsk, Pozńan and Wrocław the level of public debt is already approaching the limit beyond which they would have to declare themselves bankrupt . Furthermore, the central government has been placing increasing pressure upon local authorities to decrease their spending and levels of debt, although it is these authorities that co-fund the majority of EU investment projects. This has meant that local governments have begun cutting spending in other areas in order to enable them to pay for hosting Euro2012. For example, in Warsaw the local government has increased spending on promotion from ZŁ35m last year to ZŁ60m this year, whilst for example spending on subsidies for theatres has been cut by ZŁ10m . The cost for the four local governments, where matches will be held, for building its fanzones equals ZŁ45m. All of this is being done at a time when local governments around the country are closing schools, privatising school canteens and reducing spending on essential services such as housing that are grossly inadequate for the needs of the population.

There are also a number of problems relating to the fact that many of the investment projects have been rushed in order to be ready for the championships. A number of experts have expressed concern that the quality of many of the roads that have been built is insufficient and that these will have to be repaired or redone in the future. Furthermore, some of the companies that have built these roads now face severe financial difficulties and even bankruptcy. Already the company DSS, that built one of the main motorways (A1) in Poland, has gone bankrupt. Also the main company responsible for building roads in Poland (and which also is a leading investment company in the energy sector), PBG, has filed for bankruptcy. Why is this the case? Well, in order to win these tenders companies were compelled to reduce their price to a minimum, often to a level that was not financially viable. These companies have then not been able to meet their obligations to suppliers, contractors, etc. It is estimated that the outstanding obligations of DSS equal around ZŁ35m. The situation is even more serious for PGS , as it possesses loans from banks worth ZŁ1.7bn.
 

This does not mean that nobody is making a profit out of Euro2012. One of the major beneficiaries will of course be UEFA, that organises the Euros. Scandalously, UEFA has negotiated an agreement with the Polish government that it and its associated companies will not have to pay any tax on its earnings gained in Poland during the tournament. And the good times are not restricted to UEFA, but are also being enjoyed by those running Poland’s football association (PZPN). The PZPN has itself been submerged in a series of scandals in recent years and has failed to address in any serious way the problem of racism in stadiums. Yet those running the organisation have seen their salaries rise significantly recently. For example just a few years ago the President of the PZPN earned the very good salary of ZŁ20,000 a month. Yet the President now has two full-time contracts and earns a joint monthly salary of ZŁ80,000, whilst other leading figures in PZPN have managed to gain incomes of ZŁ50,000 a month. It should be born in mind that the average monthly income in Poland is around ZŁ3,400.
 
 
The fanzones organized on the insistence of UEFA will also be large commercial jamborees, sponsored by the usual suspects: Carlsberg, McDonalds, MasterCard, etc. The beer served will of course be just Carlsberg (yuk) and in Warsaw’s fanzone – that will hold up to 100,000 people – the largest McDonalds in Poland has been constructed (whoopee). It has been practically impossible for the average resident in the cities hosting the games to get tickets for the games and it will be mainly the large international companies that will be making the most profits from them.

 
My prediction is that Euro2012 will on the surface be an enjoyable and exciting event. Yet, it is also one that has not been organised with the best long-term interests of the economies and populations of the countries holding these games in mind. UEFA and their associated guests will leave happily with their coffers further swelled as they anticipate their next payday in France 2016.

 
For what it’s worth I predict that Poland will be knocked out in the round after the qualifiers, that England will fail to qualify from their group and that Germany will win the tournament. Then again what do I know.

2 comments:

  1. Hi Gavin, I'm writing a paper on Poland and how they have managed to stay on course whilst other European nations have struggled, I would be very interested in getting my hands on some of your statistics, can you let me know where you sourced them from? Also any other relevant information or articles would be spectacular.

    Thanks!

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  2. If you loook through the article you can see that there are links embedded in the text that show where the article is from.

    Also take a look at this article: http://library.fes.de/pdf-files/id-moe/09289.pdf

    ReplyDelete

Go for it - but if its abusive then it gets blocked