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Going for Gold?
A survey on the economics of the 2004 Olympic Games March 2004 -- The Olympic Games are a branded franchise the operation of which is awarded by the International Olympic Committee (IOC) every four years to a national capital. It's Athens turn in 2004. It's a big gamble. Greece is the smallest country to host the Games in more than half a century and the cost is putting a considerable strain on the economy. When Greece won the Games in 1997 it was argued that the cost would be bearable because 72% of the venues were already in place in an international standard sporting complex built in 1982 when Greece hosted the Paneuropean Games. But bringing the 20-year old venues up to scratch and providing new infrastructure such as the athlete's village, an equestrian centre, a rowing centre, baseball diamonds and hockey fields has proved an expensive undertaking. Initially, Athens 2004 SA, the company established to manage the Games thought it could oversee their construction using private-partnership funding. But contractors were not forthcoming and eventually the burden was passed to the state. Athens 2004 is spending just under EUR 2 billion to organise the Games and the government EUR 4.6 billion to provide the venues and associated infrastructure. Both insist that's the absolute limit of their Games-related spending. But the conservative opposition New Democracy party claims that the cost will mount to EUR 8.8 billion, while an anonymous official of the Ministry of Economy and Finance has been quoted in the press as saying the final bill will be EUR 10.7 billion. All could be correct, it depends on how you tally the bill. The government has been rigorous about applying to its Olympic Budget, only those monies that are specifically Games related. So, for example, while the Ministry of Health is spending EUR 270 million on an Olympics' operational programme which will see improvements in hospitals, emergency services and health and hygiene standards, only EUR 70 million of that is being attributed by the government to its Olympics Budget. The state is spending another EUR 1.3 billion, at least, on transport upgrades, including a Tram connecting the city centre to the Saronic coast where many Games events take place, a light railway that will connect Athens International Airport to the athlete's village and to the main competition stadium, and an extension of the Metro to the airport. These are included in commitments made to the IOC but not included in the budget. Even the EUR 600 million athlete's village project is off-budget. It's being built by the Workers Housing Organisation and will be sold to low income families after the Games. Ahead of the elections, the government is trumpeting abroad how much it is investing, while saying that it is limiting spending, and at the same time trying to mollify the provinces by saying how much money it is investing the regions through a EUR 1.27 billion budget line for sports and related developments outside the capital. The expenditure has been concentrated in the years 2003 and 2004 with the result that budget targets for these two years are going to be missed. The European Commission has predicted a 2003 deficit of 1.7% of GDP compared to an official target of 1.4% and says the 2004 outturn could be 2.4% of GDP, double the official forecast. Does this matter if all the investment produces growth and jobs? The government has estimated, but won't say, how much it expects to get back in tax from the profits of companies that have benefited from Games contracts. The state-financed Centre for Planning and Economic Research (KEPE) has done a preliminary study, based done on highly tentative early input figures, which suggests that during the period 1998 - 2010, increased spending and investments will contribute some
EUR 10.3 billion to GDP, i.e., even with the highest unofficial spending estimate the Games should in the medium term future break even in terms of their contribution to growth. But what if something goes wrong? These are the first summer Games to be held since the 9/11 terrorist incidents in New York and the authorities are spending EUR 650 million (officially), possibly EUR 1 billion (unofficially), to protect against every eventuality from assassinations to bombings to chemical -- and even to radiological -- attacks. This is the biggest headache of all because the world's media will be concentrated in Athens for the duration of the Games August 13th-29th, 2004. If something goes wrong it will happen in the full glare of media attention and the gamble of the Games will be lost. Montreal has only recently finished paying back the debt it incurred for mounting the 1976 Games. Sydney, which hosted the Games in 2000, is still counting the cost. But Barcelona, which spent USD 10.9 billion on hosting the 1982 Games, put itself on the map as a tourist, business and transport hub in the western Mediterranean and thinks every penny was money well spent. This is the bet Greece has made with itself. These and related issues are discussed in "Going for Gold?" No. 51 in the Business File Special Survey.
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