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Last Updated: Wednesday, 2 June, 2004, 16:57 GMT 17:57 UK
Olympics 'may cost Greece dear'
Barcelona Olympics - closing ceremony
The Olympics provided a boost to Barcelona's economy
The 2004 Olympics has already given host nation Greece a significant economic boost - but experts have warned it may be in for a hard landing.

PricewaterhouseCoopers (PwC) warned soaring costs and budget overruns could leave the country with hefty debts.

The Games itself is estimated to result in a 3% budget deficit, PwC said.

Operating costs of running the games have soared from 500m euros to 2bn - while reports claim the total cost of Olympic spending is near 10bn euros.

With the host nation responsible for infrastructure projects linked to the Games - such as the Olympic Village housing and new transport links - the Greek government's budget for the Games has ballooned from 2.5bn euros to 4.6bn euros.

Deficit doubles

But, PwC says that even this estimate may still be too low as the newly elected government has accused the previous administration of "losing control" of Olympic spending.

In fact, some costs have not even been included on the Olympic bill, PwC added.

Up to 1.3bn euros for transport improvements and the 600m euro athletes' village have been excluded - the latter because it is being built by the Workers Housing Organisation and will be sold off to low-income families after the Games.

With most activity and expenditure on the event concentrated in 2003-2004, the government's budget deficit has more than doubled since 2002, the study adds.

The extensive media exposure ... may enhance the reputation of Athens as an attractive business centre further attracting new investment and trade
Official figures show the 2002 deficit was just 1.4% of gross domestic product (GDP), but a year later this had risen to 3.2% of GDP - way above EU limits and sharply higher than the country's original 0.9% target.

Counting the cost

EU forecasts suggest the figure will remain the same in 2004 before dipping back to 2.8% a year later.

"But there are clearly risks that the deficit could remain above 3% of GDP if the economy slows down more rapidly after the Olympics, or if public spending growth exceeds plans, as has tended to be the case in recent years," report author Lloyd Barton warned.

One country to suffer as a result of significant public spending on hosting the Olympics is Canada.

The Montreal Olympics were financed almost entirely out of the city's coffers - and as result its taxpayers are still paying a supplementary tax on tobacco that is not expected to pay off the Olympic deficit until 2005/06.

However the report is not all grim reading.

Olympic bonus

Not only should Athens benefit from the hundreds of added visitors - competitors and tourists alike - and the cash they will spend, but it will also benefit from added investment.

Improved housing, transport and communications links are just one bonus.

Mr Barton also said that the Games may prove to be a draw for future investors.

"Olympic-related business contracts may help create longer-term business partnerships.

"The extensive media exposure ... may enhance the reputation of the city as an attractive business centre further attracting new investment and trade."

Steve Redgrave - Sydney Olympics
Steve Redgrave broke Olympic medal records _ will Greece?
And the "stock of human capital" may be raised as employees are given extra training in new areas such as languages and telecommunications, he argued.

Already the event has seen the Greek economy outperform many EU rivals - with GDP growth at 4.7% compared to an average of just over 1% across the EU as a whole.

But this could drop off after the one-time hit of the Games this summer, leaving Greece with an Olympian hangover.

Going for gold

Mr Barton said this was the case for both the 1996 Atlanta Olympics and the Barcelona Olympics in 1992.

"Together with the expected decline in investment spending after the Games ... there is clearly a risk that Greek GDP growth will slow more rapidly than suggested by the current consensus of around 3% growth in 2005," he said.

And on a lighter note, hosting the Games could spur on Greece to a better-than-usual medal performance.

Using a number of calculations - including the size of a country's GDP, whether it was part of the Soviet bloc and average income levels - PwC expects Greece to up its medal count this year from 13 in the last Games at Sydney to 29 this time.

"We find that home country advantage is important and we would expect Greece's medal count to be well up on Sydney 2000," PwC said.

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