NEWS

Strict security measures helped push the cost of the Athens 2004 Olympic Games way past the initial budget

The Olympic Games cost more than 7.5 billion euros, according to the National Economy and Finance Ministry, though that figure will keep rising as new expenditure is added daily. In 1997, when the Athens undertook to hold the Games, nobody expected the cost to be so high. Initial estimates were around two billion euros. Ministry officials admit that two factors raised the cost: The September 11 terrorist attacks on the United States, which made security costs skyrocket, and the delay in starting work on construction, which further pushed up the final cost. The 7.5 billion euros divides up as follows: 6.6 billion came from the Public Investment Program, 600 million from the state budget, and another 300 million from the state budget for Athens 2004. The cumulative picture of this disbursement rose from 1.3 billion euros in 2000 to 3.5 billion in 2001, 4.6 billion in 2002, 5.5 billion in 2002 and 6 billion in 2004. The remaining sum will soon be paid for Olympic infrastructure. Ministry officials say that the previous government presented a fictitious budget, which was stuck at 4.6 billion euros, for the Olympics until the very last minute. High-ranking officials say that in 2004 they signed Public Investment Program payments of 1.4 billion euros (destined for the Olympics). Real disbursements this year apparently exceed 3 billion euros. PASOK vehemently counters these claims. Former government officials say the present government has greatly overestimated the sums involved and must present a detailed account of the cost of the Games if it wants to be believed. The Games are part of the public finance, which appears to be the most problematic area of the economy. In autumn 2002, when Nikos Christodoulakis, then the economy minister, presented the preliminary budget for 2003, he was delighted to record a 0.5 percent GDP surplus. Now we know that the 2003 budget had a 4.6 percent deficit and there is no doubt that Christodoulakis knew it at the time. Last week we learned that the deficit for 2004 is estimated to be 5.3 percent of GDP, and that public debt exceeds 200 billion euros. The figures come from a fiscal inventory made by the government and gives a very different picture from the one that the previous government attempted to paint, showing a strong economy. Despite the difficulties, National Economy and Finance Minister Giorgos Alogoskoufis believes the situation is manageable by means of gentle fiscal adjustment. According to Alogoskoufis, the 2005 deficit will be around 2.8 percent. This will be managed through elimination of Olympic expenditure – which has accounted for 1 percent of GDP – from the budget, and also through additional revenue generated by tax reforms that are estimated at another 1 percent of GDP. Other measures that will ratchet down the deficit include a reduction in primary expenditure of 0.5 percent of GDP, which will come from trimming state sector expenses. The 2005 budget will gain funds equivalent to 1-1.5 percent of GDP from privatization of state-run enterprises. The money will go toward reducing debt, which is the Greek economy’s principal problem. Greece had to borrow more than 40 billion euros to service its public debt in 2004. This is a huge sum which would have sent interest rates sky high if Greece were not in the European Union and the eurozone. Prime Minister Costas Karamanlis will present a picture of the situation in his speech at the International Trade Fair in Thessaloniki. Statements made last Friday by Federation of Greek Industries (SEV) President Odysseas Kyriakopoulos and New Democracy’s honorary president Constantinos Mitsotakis represent two extremes of the spectrum. The former stated outright that tough measures are not called for, but reasonable steps that will make Greece attractive to foreign investors combined with curbs on excessive state expenditure. By contrast, Mitsotakis stuck to his view that measures should be taken to reverse the economy’s downhill course. The government takes the middle view, emphasizing the importance of boosting development.