ECONOMY

Mid-term economic effects of the Olympics look uncertain

Just as the Olympic Games draw closer, skepticism about the economic situation the day after grows stronger. One can sense it either by talking to the country’s top businessmen or the average guy on the street, and is centered on one issue: unemployment. Is pessimism justified or is it totally unfounded? The answer is not clear-cut, since one has to balance the unspecified number of people employed in tasks related to the Games who will lose their jobs against the economic potential created by the organization of the event in the medium to long term. «Do not quote me, but speaking to other industrialists and ministers I get the same idea. They all think there will be a significant rise in unemployment after the curtain falls,» said the president and CEO of a mid-size listed company who is also its major shareholder. A rise in unemployment is likely given the fact that thousands of people found employment because of the Games. Although estimates vary widely from 5,000 to 65,000, one should take into account that some are working full time while others are working part time. Lose and gain Even looking at the statistics from other cities which have hosted the Games in the past, it is difficult to reach a conclusion as to what was the net effect on unemployment. It is true that thousands lost their jobs after past Games, but it is equally important to note that thousands of permanent jobs were created in the same cities because of the structures put in place due to the Olympics. Moreover, we do not know yet whether Athens will be able to imitate Barcelona and become a regional hub for international companies, although chances are admittedly slim. Barcelona ranked 19th in telecommunications services and 15th in transport infrastructure at a pan-European level in 1992, the year it hosted the Olympic Games, but 10th in terms of proximity to markets, eighth in the category of preferred city and top level personnel availability, and fifth in school facilities, lodgings and medical services. Athens should normally rank much lower this year on the same criteria, but its proximity to the Balkans may partially improve its overall position. Although there are no figures, it is doubtful that the majority of the personnel employed in the preparations for the 2004 Games have been trained to acquire special skills to find a permanent job afterward. This could translate into greater job losses than would have been the case otherwise. The employment equation, however, is also related to the general economic climate. By looking at the figures, one realizes that the Greek economy grew at a brisk 4.1 percent annual rate in the first quarter and is expected to do the same in the second. However, private consumption spending exhibited signs of fatigue in the first quarter, raising concerns about the sustainability of high GDP growth rates in the third and fourth quarters and beyond. This may explain why industrialists are downbeat on job prospects in the post-Olympics era. Undoubtedly, Greece has yet to reap the benefits of being at the center of world attention for a couple of weeks, assuming the Games run smoothly. This is equivalent to spending large sums on advertising tourism and exports for free and should have an impact in the medium term. On the other hand, Greece has not done much in acquiring its own unique branding. Also, inadequate organization and planning in the public sector means the burden falls squarely on the shoulder of private companies. If free advertising is not enough, Greece has invested billions in infrastructure and other projects without having received almost anything back yet. Still, these investments should translate into increased efficiencies in terms of transportation and contribute to the attraction of new foreign direct investments. Debt and investment Of course, debt incurred because of the Games should be repaid, and this is definitely a burden. However, assuming the total bill amounts to 6.0 billion versus 4.6 billion estimated initially, and given the fact that a large portion of it has been financed by budget funds, the debt to be serviced should not be so high as to become a big burden. The financing of the Games by the public investment budget also brings into play another factor. The displacement of projects co-financed with EU funds resulted in lower EU structural fund inflows, causing a larger general government budget deficit in the last few years. This should not be the case from the fourth quarter onward, which means Greece would have the opportunity, starting next year, to cut its budget deficit at the same time as maintaining high public investment spending levels to support high economic growth rates. Is Greece, however, ready to implement new large-scale projects co-financed with the EU, especially outside the big urban centers, requiring preparation so as to avoid going through a significant slowdown? This is to be found out after the Games. There is no doubt, though, that a positive answer would have brightened the economic picture – particularly as regards employment – and become a source of hope instead of desperation for employees and employers alike. Is there too much pessimism in the air, which makes the country’s top business people view the employment situation after the Olympics in such a dark light? Perhaps, but pessimism is not completely unfounded given the expected layoffs when the Games are over. It is more a battle between a disappointing short-term reality and positive medium-term expectations than anything else, and reality wins at this point. Of course, time will show who is right and who is wrong.