Athens Olympics: First pain, then gain for Greece’s economy

Next month’s Athens Olympics will attract scores of foreign tourists and investors to Greece in the coming years, helping the country recoup its sizable investment in the Games, officials hope. «The Games are about putting Greece in the mind of the world,» said Greek Deputy Finance Minister Petros Doukas, a former investment banker with US credit giant Citibank. But such hopes have failed to materialize so far, while Olympics-related expenditure has tarnished the country’s recent, hard-won reputation for fiscal rectitude. The Greek economy has put nearly 8 billion euros ($10 billion) – more than 5 percent of the country’s annual gross domestic product (GDP) – into the August 13-29 Games. More than 6 billion euros of taxpayer money was spent by the government on new stadia, roads and security for Games’ visitors. Private firms are estimated to have forked out another 1.5 billion euros, as business leaders, particularly in services, spruced up their enterprises – from overhauling hotels to rejuvenating the Greek capital’s cranky taxi fleet. «We estimate that successful Olympic Games can attract an additional 450,000 tourists by 2011. This in itself can add 1.1 billion dollars, or 0.6 percent of GDP, a year to the Greek economy,» said Fanni Palli-Petralia, Greece’s deputy culture minister who is in charge of the Olympics. Tourism accounts for about 15 percent of Greek GDP. More than 10 million tourists visit the country each year. But an unwholesome mix of stagnating European economies, terrorism fears and Olympics-related construction delays that spoiled the country’s image smashed Greeks’ dream of busy pre-Olympic tourist flows. «(Commercial) exploitation of the pre-Olympic period was lost… it is our duty to exploit post-Olympic opportunities,» Petralia said after figures showed 2004 tourist arrivals dropping by as much as 5 percent compared with the previous year. Frantic Olympics-related construction is estimated to have boosted Greece’s GDP annual growth rate – currently at 4.0 percent, one of the eurozone’s highest – by around 0.2 points over each of the past three years, according to a study by the state-run Center for Economic Planning and Research (KEPE). But the end of the Games could signal the end of the boom. Business confidence among Greece’s hitherto pampered construction companies fell for the fourth month in a row in June, according to a survey by Greece’s Foundation for Economic and Industrial Research (IOBE). IOBE’s confidence index fell to 105.8 points, some 35 percent below its peak from March 2000. And doubts are being raised about the roughly 40 Olympic venues’ financial sustainability. «The new infrastructure could be a positive legacy, but it may be associated with a debt overhang that could take many years to pay off,» accountancy firm PricewaterhouseCoopers said in a report. After years of efforts to put Greece’s finances on a sound footing in the runup to eurozone entry, Olympics-related payments pushed the country’s budget deep into the red again. Greece’s public deficit for 2003 breached eurozone budget rules and the European Union formally put the Greek economy under surveillance. Post-Olympics maintenance of the Games venues could cost more than 100 million euros a year, according to a government-commissioned study by the University of Thessaly. Greece is the first Olympic host since the communist-run 1980 Moscow Games to finance the Games entirely out of state funds. «Personally speaking, I would definitely have involved the private sector in preparations through public-private partnerships,» said Doukas, criticizing Greece’s previous government which lost office in the March 7 election. The country’s new conservative government hopes to arrange with business leaders long-term leases and equity sales in the venues after the Olympics. Apart from the business volume to be created by visitors during the Games, estimated by KEPE at around 7 billion dollars, Doukas said that the Games will benefit Greece’s private sector in the long run. «Greek firms have acquired the capacity to finish big projects,» he said. But only a few have so far translated this newfound experience into new contracts won abroad, preferring apparently to invest mainly in energy and property development.