EURO 2004 wishful-thinking and the legacy of debt for Portugal

The story of Portugal hosting the EURO 2004 football tournament reflects deeper problems about how the country is run and it has recently emerged just how much the unfortunate Portuguese tax payer is still paying for the privilege of running the tournament more than 10 years later. In fact the tournament itself was a great success and demonstrated what a fantastic country Portugal is to visit and that it is able to run complex international events; but the investment that went into building the stadiums reflected the megalomania of those in charge from the Prime Minister down and the flippant approach to public debt that was so prevalent across the country.

Portugal build seven brand new stadium to host EURO 2004 games and upgraded 5 existing ones, at a cost of 665 million euros – it may have been possible to justify this expense if over the long term they could have more or less pay for themselves through fans coming through the turnstiles. But this was never a realistic proposition – outside of the 3 main Portuguese football teams (Porto, Benfica and Sporting), there are no teams that get 10,000+ supporters turning up and most of the first division teams typically get just a few thousand. Meanwhile the stadiums that were handed over to them at the end of the tournament seat 25,000 or more.

The argument at the time was that once the stadiums had been built then the fans would start to turn up in greater numbers, but as with so many of these megalomaniac projects, this was just a pipe dream. Nobody ever really thought through what the legacy would be of these white elephant stadium dotted round the country. The three most extreme cases are the Algarve, Aveiro and Leiria stadiums, none of which currently have a first division team, which means they do not even get to enjoy a semi-full stadium when they have a home game against one of the Big 3 teams, so they are pretty much empty all year round. The result is that the local councils have to pay maintenance and their share of the debt incurred in building them to the tune of 25,800 euros a day between them (€4,200 for the Algarve, €8,300 for Aveiro and €13,300 for Leiria). That is a total of about €750,000 a month. When you see the terrible cost of austerity in Portugal, not least in the drastic under-funding of local councils, these numbers are just appalling.

And why does this story reflect the sorry story of Portugal over the last 20 years? Because successive Portuguese Governments have focused on pie-in-the-sky, costly projects (often co-funded by the similarly minded European Union), designed to “put Portugal on the map”, rather than doing the less glorious taks of making Portugal an attractive and competitive country for business. There are actually a lot of very well-run and successful businesses in Portugal, but they have almost invariably succeeded despite of the Government rather than because of it. It is only since the troika arrived in Portugal in 2011, that all the absurd, unaffordable white elephant infrastructure projects were finally put to bed and the Government focused on making the books balance, reducing red-tape, reforming labour markets, reducing corporate taxation and all the other good stuff that Portuguese business had been crying out for.

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So although the country is still paying for the follies and irresponsibility of previous Governments, it is beginning to feel like a serious business environment is emerging and there are signs of growing inward investment to Portugal and certainly strong growth in exports. The real issue is that Portugal’s economy needs generational change, not just the 4 short years of reform that it has had and it remains to be seen whether the electorate will have the stomach to see the job through when they vote in the general election on the 4th of October, or whether they will go back to voting in the clowns, criminals and wishful-thinkers who have done so much damage to the country in the past.