Ah, the pageantry of the Olympics: the emotional medal ceremonies, the salacious rumors from inside the Village, the annihilation of entire first-world economies.
All right, generally applied, that last one is a bit of an exaggeration, but it’s true in at least one case. The Olympics are exorbitantly expensive for host countries, requiring extensive construction projects whose costs are rarely recouped, and leaving behind facilities to be overgrown with vines decades later. And in the case of the Athens Summer Games, the pain was particularly sharp. In fact, it helped immerse Greece in the debt crisis that still beleaguers it today.
After decades of traveling the world, the Olympics, like Odysseus, finally returned home in 2004, sending hundreds of thousands of tourists flocking to Athens. But the cost of the Summer Games was calculated at $11 billion, of which the Greeks ended up stuck with $7.8 billion. And that didn’t include billions more for an infrastructure revamp, such as a new airport and metro system.
If you don’t understand how a small Mediterranean economy could handle those kinds of costs, then you’re underestimating the insanity of the European Union. Greece joined the euro currency in 2001. Its debt far exceeded the EU’s acceptable limits, but Goldman Sachs cooked the books so it would qualify, and eurocrats—addled by dreams of “ever-closer union”—looked the other way. This gave it access to the EU’s unsustainably low interest rates and allowed it to go on a spending spree in preparation for the Olympics.
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Only a month after the closing ceremonies, Greece’s newly elected government announced that debt had reached 112 percent of GDP, almost twice the amount permitted by EU rules. According to Greece’s new prime minister, the red ink was concealed by the previous government: “Social policy was done with borrowed cash, military spending did not show up in the budget, debts were created in secret,” he said.
Three months later, Greece conceded it fudged its debt numbers to gain access to the euro, a shocking admission that was promptly shrugged off by EU ministers. So the borrowing continued and the debt festered under the Acropolis. You didn’t need the Oracle of Delphi to predict what would happen next. Today, throttled by the 2008 crash and bled by a series of failed German lab experiments, Greece’s debt-to-GDP ratio stands at 177 percent and its unemployment rate is stuck at more than 23 percent.
The Olympics didn’t destroy Greece, but they were emblematic of the shop-a-thon that ultimately engulfed the European economy. The Games came home and found not suitors, but debtors. Today, Athens is dotted not just with ancient ruins, but modern ones, stagnating pools and abandoned slalom facilities. “It’s hard not to think that maybe it wasn’t worth it,” gymnast Christos Libanovnos told Time magazine.
Greece and the EU are primarily at fault for the spendthrift games, but also deserving of blame is the International Olympic Committee (IOC). Between the Athens Olympics and the crash of 2008, the IOC generated $6 billion in revenue, not a dime of which was used to relieve Greek liabilities. This is common practice: the IOC routinely awards the games to doe-eyed developing nations, many of which simply aren’t able to afford them.
This year is no exception. Beneath the “it’s a small world” sheen of the Rio opening ceremonies was a Brazil in the midst of political crisis and economic recession, with a budget deficit of $6 billion. The Brazilians won’t suffer the same fate as the Greeks, but the tension caused by mounting costs is already palpable: “Brazil cannot pay caviar bills for others,” Rio’s aggravated mayor recently said of the notoriously louche IOC.
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What’s the solution? Ventilate the IOC’s corruption, tighten the fiscal requirements for hosting the Olympics, and stay budget-conscious by upping business sponsorships and corporate involvement the way Los Angeles did for the 1984 Summer Games. As my Rare colleague Casey Given noted last week, the Olympics can actually make a profit if they’re willing to privatize.
As for Greece, its economy was leveled in part by those crippling infrastructure investments. And, no, that’s not an oxymoron. Turns out you can’t prime an economy by paying workers to dig holes, no matter what Paul Krugman likes to think.