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Germany has long suffered from economic setbacks. The chief economist believes the European Football Championship will only bring a short-term boost.
On Friday, June 14, the European Football Championship kicked off in Germany.
As you know, Norway did not qualify, but 24 other countries will compete for the EC trophy until July 14. The championship will be held in 10 cities in Germany.
German authorities hope the tournament will provide a boost to Europe’s largest economy, which is expected to grow by just 0.1% in 2024. economic recession I am 2023.
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– Kjersti Haugland, chief economist at DNB Markets, told E24 that football tourism will boost the economy during the European Championship by stimulating consumption, among other things.
She believes we will see the impact of the championship in the GDP data that follows the championship.
– Activity will increase during this period, but this will only be a temporary effect. Haugeland said it would have little impact on future interest rate decisions by the European Central Bank (ESB).
Economic reversal
The German economy, which is dominated by industry, has been in trouble in recent years due to rising energy prices and other reasons. The automotive industry has also been in trouble for a long time due to the shift to green production and intensified competition from China.
Energy prices are falling again, Haugeland explained, in part because the industry has slowed down production.
– As a result, unemployment in Germany has started to rise cautiously compared to southern European countries. This has led consumers to be more cautious in their spending, Haugeland said.
She believes that the largest economies have been struggling with difficulties, which is a big reason for the ESB. Last week’s rate cut For the first time since 2019.
– Although inflation remains high, the rate cut is seen as a stopgap measure to lubricate the economy.
The chief economist noted that things look brighter for Germany in 2024 against the backdrop of rising consumer purchasing power. She noted that wage growth is very high compared to other eurozone countries.
Haugeland said it was consumers, not the European Football Championship, that would drive the German economy further.
She said only large-scale events like the Olympics could have long-term positive effects.
– The Olympic Games have a bigger impact, last longer and involve a bigger investment. During the EC, when stadiums are already in place and investment is smaller, you watch for football, not for the impact on the economy, she said.
Temporary Effect
Nevertheless, Kjersti Haugland believes that the EU will have an impact on GDP and price growth.
– Emerging markets will certainly have an impact on inflation, but the nature of it is that when emerging markets end, inflation levels will fall back. The chief economist said that the impact on the market may be apparent when inflation data is released.
The data showed that after adjustment, Germany’s inflation rate in May rose by 2.8% from May 2023, which is comparable to other EU countries. German statistical authorities. This was up from 2.4% in April.
according to Reuters With more than 2.7 million tickets sold, the tournament is expected to boost spending in several sectors, especially the hotel and restaurant industry and the airline industry, which are likely to see price increases during this period.
– Policymakers will not take into account the upward pull brought by tourism. This is a factor with a temporary effect, so it will have a fairly neutral impact on politics, Haugeland said, adding:
– While it won’t affect ESB, it might still make it harder to distinguish what is pure impact of a champion and what is latent factor.
Uncertain long-term impact
German breweries are among those that expect a recovery during the tournament.
– Holger Eichele of the German Beer Association told Reuters that previous major football tournaments had shown that more beer was drunk during matches than was normal during the summer weeks.
When Germany hosted the soccer World Cup in 2006, beer sales increased by about 5 percent in the run-up to and during the tournament, the news agency reported.
It is uncertain how much of an impact the championship will have on the overall economy.
– The European Commission can have a positive psychological and indirect effect on the German economy. The hotel and restaurant industry will particularly benefit from the increase in demand, but this will not have a significant impact on the overall economy, said Marcel Fratzscher, director of the German Institute for Economic Research in Berlin. Yahoo Sports.
Michael Grommling of the Cologne Institute for Economic Research shares the same view.
“We do not expect any macroeconomic impact from the European Football Championship on Germany. We also saw that during the 2006 World Cup,” he told Yahoo Sports.
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