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German Businesses Await Economic Effects of World Cup

  • Catherine Drew

The 2006 World Cup will see millions of soccer fans descend on Germany for four weeks of football madness. In that time each visitor is expected to spend around $400 (U.S.) a day. In the run-up to the games, stadiums have been improved and roads built, giving another boost to a German economy that has seen five years of stagnation.

The German company Nici paid $33 million (U.S.) to FIFA, world football's governing body, for the exclusive rights to manufacture toys of the official World Cup mascot, “Goleo the Sixth.”

Goleo has remained unloved and largely on the shelf. Nici has declared bankruptcy amid reports that sales were not strong enough to compensate for cost of the rights. The former head of the company has been arrested for fraud.

Other German businesses are hoping to do better. Some shops in the center of Berlin have turned over 10 percent of their stores to hold World Cup merchandise.

Shop owner Lan Lu says she is being cautious because she doesn't know how the World Cup will impact sales.

German authorities are upbeat about the economic effects of the tournament. After five years of stagnation, the country expects a 1.6 percent increase in its gross domestic product this year, with analysts saying a half-percent of that will be because of the World Cup.

The government has spent around $7.7 trillion on improving stadiums and transportation infrastructure.

That includes the new multi-level central train station in Berlin that took 11 years to build and is being called the largest in Europe. It cost more than $900 million.

Berlin, as with the other German cities hosting matches, is hoping the money, exposure, and prestige of the World Cup will translate into earnings and boost the existing signs of an economic recovery even further.

The hotel and catering industry anticipate additional earnings of about $650 million.

It is estimated the World Cup created 60,000 jobs nationwide, with 20,000 of those remaining after the tournament ends. However, the new jobs will only make a small dent in the country's 11 percent unemployment figure.

Some businesses, such as the five-star Grand Hyatt hotel, anticipate the benefits will come later. Spokeswoman Kerstin Riedel says the hotel will be looking for long-term gains.

“On the whole, we don't see that many bookings, compared to usual May or June. I would say that World Cup will have impact on 2007 and 2006,” Riedel said. “I think it's more business for the future that we can expect.”

Ulrike Regele, of a leading German business group, says economic analysts must look at the big picture. “It's difficult to measure, what's normal growth, growth from World Cup,” Regele said. “The real economic numbers, not that important, the important thing is the image we get. Loads of reports, showing German pictures, that will be big profit for Germany.”

A clearer picture of the economic benefits of hosting the World Cup is likely to emerge in a few years. Certainly, Germans are hoping they fare better than the mascot.

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