Olympics put Greek economy in tailspin
By DOUG SAUNDERS
From Tuesday's Globe and Mail
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London ― After a summer of fun, Games and frantic spending on the world's largest party, the people of Greece are waking up this week to an Olympic hangover of truly gold-medal proportions.
Greeks were proud of an Olympics that took place on schedule and without any serious security or organizational threats, but they are now learning the true cost of all that last-minute construction and street cleaning: a bill that could cripple the country's economy for a generation.
Greek Prime Minister Costas Karamanlis conceded yesterday that the country's deficit has soared faster and higher than that of any European country, reaching four times its projected level and twice the legal limit allowed for European Union member countries.
In response, the bond-rating agency Standard & Poor's lowered the country's debt-rating outlook from "stable" to "negative" yesterday, blaming "an accelerating loss of fiscal discipline" partly related to the Games. The agency declared Greece's fiscal position the weakest of any major European economy.
Mr. Karamanlis placed the blame squarely on the Olympics. The scramble to get a half-dozen stadiums finished in time for the August games rang up billions in overtime costs, and security and terrorism-prevention costs were five times as high as the pre-Sept. 11 games in Sydney, Australia.
"A large part of Olympic, social and other spending was not written up in the budget. . . . The public debt exceeds even the most pessimistic of estimations," he said, laying much of the blame on the moderate-left Socialist Party, which his right-leaning party defeated in March. "The real deficit was not recorded."
The Games, which cost Greek taxpayers at least $10-billion, are credited with at least a fifth of the soaring debt. Total Greek public debt has now reached 112 per cent of the country's gross domestic product, which amounts to $75,000 for each Greek household.
By contrast, Canada's debt peaked at 68.4 per cent in the mid-1990s, prompting huge cuts in federal spending.
While Greek politicians had optimistically promised a tourism-driven economic boom and an improved standard of living in the wake of the Games, the opposite seems to be taking place. The International Monetary Fund predicted a period of contraction: "Underlying fundamentals suggest the economy may slow materially in 2005."
A harsh period of fiscal austerity and reduced ambitions was predicted yesterday, with both the IMF and the Organization for Economic Co-operation and Development declaring that Greece will have to slash wages and social spending if it is to remain competitive enough to earn its way back into prosperity.
Greece has now joined a large club of governments that have been economically crippled by playing host to the Olympic Games. The most famous member is Montreal, whose municipal bill for the 1976 Olympics is not expected to be fully paid until 2006.
Mr. Karamanlis acknowledged that repaying the Olympic debt would entail sharp cuts to public services -- an awkward move, as the Games were sold to the Greek public as an economy-building event that would raise their standard of living. The Prime Minister tried to describe the cuts in optimistic terms.
"We will implement radical tax reforms that support investment . . . a new development law that helps small and medium enterprises flourish . . . new business frameworks that cut down bureaucracy," he said. "We will make good use of the post-Olympic period and promote our country's competitive advantage in combination with the new investment-friendly environment that we are creating."
However, the only concrete moves he announced were the sale of a government-run savings bank, a cut in military spending and an attempt to privatize Olympic Airlines.
By DOUG SAUNDERS
From Tuesday's Globe and Mail
E-mail this Article
Print this Article
Advertisement
London ― After a summer of fun, Games and frantic spending on the world's largest party, the people of Greece are waking up this week to an Olympic hangover of truly gold-medal proportions.
Greeks were proud of an Olympics that took place on schedule and without any serious security or organizational threats, but they are now learning the true cost of all that last-minute construction and street cleaning: a bill that could cripple the country's economy for a generation.
Greek Prime Minister Costas Karamanlis conceded yesterday that the country's deficit has soared faster and higher than that of any European country, reaching four times its projected level and twice the legal limit allowed for European Union member countries.
In response, the bond-rating agency Standard & Poor's lowered the country's debt-rating outlook from "stable" to "negative" yesterday, blaming "an accelerating loss of fiscal discipline" partly related to the Games. The agency declared Greece's fiscal position the weakest of any major European economy.
Mr. Karamanlis placed the blame squarely on the Olympics. The scramble to get a half-dozen stadiums finished in time for the August games rang up billions in overtime costs, and security and terrorism-prevention costs were five times as high as the pre-Sept. 11 games in Sydney, Australia.
"A large part of Olympic, social and other spending was not written up in the budget. . . . The public debt exceeds even the most pessimistic of estimations," he said, laying much of the blame on the moderate-left Socialist Party, which his right-leaning party defeated in March. "The real deficit was not recorded."
The Games, which cost Greek taxpayers at least $10-billion, are credited with at least a fifth of the soaring debt. Total Greek public debt has now reached 112 per cent of the country's gross domestic product, which amounts to $75,000 for each Greek household.
By contrast, Canada's debt peaked at 68.4 per cent in the mid-1990s, prompting huge cuts in federal spending.
While Greek politicians had optimistically promised a tourism-driven economic boom and an improved standard of living in the wake of the Games, the opposite seems to be taking place. The International Monetary Fund predicted a period of contraction: "Underlying fundamentals suggest the economy may slow materially in 2005."
A harsh period of fiscal austerity and reduced ambitions was predicted yesterday, with both the IMF and the Organization for Economic Co-operation and Development declaring that Greece will have to slash wages and social spending if it is to remain competitive enough to earn its way back into prosperity.
Greece has now joined a large club of governments that have been economically crippled by playing host to the Olympic Games. The most famous member is Montreal, whose municipal bill for the 1976 Olympics is not expected to be fully paid until 2006.
Mr. Karamanlis acknowledged that repaying the Olympic debt would entail sharp cuts to public services -- an awkward move, as the Games were sold to the Greek public as an economy-building event that would raise their standard of living. The Prime Minister tried to describe the cuts in optimistic terms.
"We will implement radical tax reforms that support investment . . . a new development law that helps small and medium enterprises flourish . . . new business frameworks that cut down bureaucracy," he said. "We will make good use of the post-Olympic period and promote our country's competitive advantage in combination with the new investment-friendly environment that we are creating."
However, the only concrete moves he announced were the sale of a government-run savings bank, a cut in military spending and an attempt to privatize Olympic Airlines.
