Bloomberg News

England Fan Snub Threatens Ukraine Economy’s Soccer Stimulus

June 11, 2012

England Fans’ Snub Threatens Ukrainian Economy’s Soccer Stimulus

A man walks in front of tents decorated with the EURO 2012 tournament cup on Independence Square in Kiev. Photograph: Sergei Supinsky/AFP/GettyImages

For some England fans, the 3,120- kilometer (1,939-mile) trek to a Ukrainian coal-mining hub for this month’s European soccer championship is a voyage too far.

“With two of our games in Donetsk, we’re virtually talking about going to a European tournament in Asia and there are no direct flights,” said Mark Perryman, a spokesman for London- based supporters. “Unsurprisingly, the numbers are very low.”

The reluctance of fans across Europe to travel to the former Soviet country’s eastern edge threatens Ukraine’s goal of as much as 1.5 billion euros ($1.9 billion) in tourist revenue from Euro 2012 as the continent’s debt crisis imperils demand for its steel and grain exports. The final figure may be less than half of that target as supporters balk at transport and accommodation costs even after almost $14 billion of pre- tournament investment, Erste Group Bank AG (EBS) and Capital Economics Ltd. predict.

“Money is unlikely to rain down on Ukraine,” VTB Capital economist Dmitry Fedotkin said June 1 by phone. “I don’t expect Euro 2012 to considerably spur economic growth.”

While some fans are relishing the adventure of visiting the former Soviet republic, four times more would have traveled had England’s initial games been held in neighboring Poland, the tournament’s co-host, according to Perryman. England’s first match against France kicks off at 7 p.m. local time in Donetsk’s Donbass Arena.

Balotelli’s Threat

Concern about potential racial abuse is also cooling the enthusiasm of potential travelers. The relatives of England player Alex Oxlade-Chamberlain joined the family of teammate Theo Walcott in deciding to stay away from the tournament, the London-based Independent newspaper reported May 25.

Italy’s Mario Balotelli threatened to walk off the field if racially abused, saying he would “kill” anyone who throws a banana at him, the BBC reported May 30.

Ukraine has no racism, which is “Europe’s problem,” as the former communist country doesn’t have significant immigration from Asia and Africa, Oleg Voloshyn, a spokesman for the country’s Foreign Ministry, said May 30 on the government’s website for the tournament.

Still, former England captain Sol Campbell advised fans in an interview with the BBC not to travel, suggesting they would be risking their lives by doing so. The Dutch squad reported racist chanting at a training session last week in the Polish city of Krakow, the U.K.’s Guardian newspaper said June 7.

Average Spend

English officials estimate 3,000 to 4,000 fans will make the trip to Ukraine and Poland, a tenth of the number that traveled the last time the team qualified for Europe’s premier national soccer contest eight years ago in Germany.

At Euro 2008, visitors spent an average 1,327 euros and 983 euros a head in co-hosts Austria and Switzerland, according to Erste. About 500,000 tourists will probably visit Ukraine for the three-week tournament, leaving a combined 400 million euros, or approximately 800 euros each, it estimated.

“Ukraine is still far below European standards in transport quality and service industries,” Erste analysts including Birgit Niessner wrote May 22 in a research note. In addition, “some football tourists may be discouraged by high room rates.”

Flights Costs

A round-trip air ticket from London to the eastern city of Donetsk, 125 kilometers from the Russian border, costs as much as 880 pounds ($1,359), while a night in a three-star hotel can stretch to 455 euros. The cost of a similar room in Warsaw, where the tournament kicked off June 8, ranges from 200 zloty ($58) to 1,500 zloty and most flights to Polish cities are less than 1,000 zloty.

As of May 29, tickets were available for nine matches in Ukraine compared with one in Poland, according to UEFA.

“If they want to welcome the people, they have to do something because the people will not go if the prices are too high,” UEFA President Michel Platini said in an interview in Budapest.

Construction of airports and hotels for the tournament went ahead even as the global credit crisis that followed Lehman Brothers Inc.’s collapse prompted Ukraine to sign a $16.4 billion International Monetary Fund bailout in 2008 and erased almost 15 percent of gross domestic product the following year.

Economic Boost

While the economy expanded 5.2 percent in 2011, growth may slow to 1.6 percent this year, Fitch Ratings said May 11. Ukraine’s current-account gap may widen to 6.5 percent of GDP this year, according to the IMF.

The cost of insuring government debt against non-payment for five years using credit-default swaps has jumped to 851 basis points from 462 a year ago. The hryvnia lost as much as 1 percent to 8.147 per dollar June 8 amid speculation the government may devalue the currency. It was 0.1 percent lower at 8.0913 as of 12:52 p.m. in Kiev.

Ukrainian officials say the tournament will give the economy a shot in the arm.

As a result of Euro 2012 “Ukraine will not get less than 1.5 billion euros of revenue,” Borys Kolesikov, the deputy prime minister responsible for Euro-2012, said May 30. The infrastructure built for the tournament should help turn Donetsk into a business center and other cities into tourist hotspots, he said today on the government’s website.

Jail Sentence

Adding to fans’ concern over costs, Ukraine’s image has suffered in recent weeks as European Commissioners and other leaders from the continent pledged to boycott matches in the country in protest at the imprisonment of former Prime Minister Yulia Tymoshenko.

The opposition leader was handed a seven-year prison sentence in October after being convicted of abuse of office in signing a natural-gas deal with Russia in 2009 that’s harmful to Ukraine. She’s complained of inhumane treatment including beatings, accusations prosecutors deny.

U.K. ministers won’t attend the tournament’s opening stages in Ukraine because of human-rights concerns, the British Foreign Office said June 7.

“This starkly underlines the country’s problematic political climate,” Amsterdam-based ABN Amro Group NV analyst Arjen van Dijkhuizen, the author of the Soccernomics 2012 report, wrote in a May 29 research note. “The boundary between sport and politics is once again blurring in the run-up to Euro- 2012.”

Still, logistics trump Ukraine’s political backdrop as the priority for England supporters, according to fan representative Perryman, who laid out Poland’s main advantages over its bigger neighbor in straightforward terms.

“It’s a lot easier to get to and a lot cheaper,” he said.

To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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