Ukraine Unlikely To Recoup Euro 2012 Losses
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
The Ukrainian economy may never recover its $13.4 billion outlay to host next month’s European football championship, claimed a report by Reuters on Sunday, as corruption scandals and a growing debt burden continues to weigh heavily on the nation’s investment attractiveness.
The Ukrainian economy may never recover its $13.4 billion outlay to host next month’s European football championship, claimed a report by Reuters on Sunday, as corruption scandals and a growing debt burden continues to weigh heavily on the nation’s investment attractiveness.
The former Soviet republic will co-host the upcoming Euro 2012 football tournament next month alongside Poland, and has spent nearly $13.4 billion in order do so – which includes a $6.6 billion contribution from the government.
Yet while the last tournament in 2008 saw millions of dollars in profits for co-hosts Austria and Switzerland, analytical group Da Vinci AG are sceptical of the tournament’s impact on Ukraine and believe that the country could actually face close to $6-8 billion in losses.
“Ukraine will not receive any financial income or significant economic impact from co-hosting the Euro 2012 championship,” warned Da Vinci AG managing partner Andriy Kolpakov.
[quote]”And any possible improvement in image has run up against internal politics and the European Union’s reaction to it,” he said.[/quote]The imprisonment, and subsequent alleged mistreatment, of opposition leader Yulia Tymoshenko for instance, was seen to have hurt Ukraine’s creditworthiness – with numerous European politicians announcing a boycott of the event, which traditionally draws close to a 8-billion strong TV audience and 100 million visitors to the host country.
Related: Yulia Tymoshenko jailed for 7 years, says Ukraine trial ‘like Stalin’s Soviet Union’
[quote]”Despite years of preparation, a decent tourist infrastructure and facilities have not been created to entice the majority of the fans to return to Ukraine,” Kolpakov said. “You can forget about a serious surge of interest in Ukraine from Western tourists.” [/quote]Erik Nayman, from brokerage Capital Times, added that the losses from the tournament would place an additional burden on Ukraine’s existing public debt, with half of the state’s current domestic debt directly linked to government spending on Euro 2012.
[quote]”In effect, the (state) budget took on the additional debt burden and taxpayers for many years to come will be paying for the Euro soccer holiday,” said Nayman.[/quote]Ukraine already faces $11.9 billion in debt obligations this year, $5.3 billion of which is denominated in foreign currencies. In June, the government must repay a $2 billion loan to Russia’s VTB Capital as well as a $500 million obligation for outstanding Eurobonds.
Related: Ukraine Economy
Related: Ukraine Economic Statistics and Indicators
Related: Default Danger: 12 Countries On The Brink Of Crisis
At present, Kiev has yet to agree on a new credit line with the International Monetary Fund (IMF) and has been unable to issue Eurobonds for more than a year because of its public debt. Alexander Valchishen at brokerage Investment Capital Ukraine believes that the current economic and political situation in the country has scared off some foreign investors and made other investors wary of the future investment climate.
“Foreign direct investment will increase only by improving the investment climate, that is, with less bureaucracy,” he said.
