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The cost of the games

When I put on my Athens 2004 Olympics hat I recall pleasant memories. I went to Greece two years ago with my son, and we ran on the ancient track at Olympia, site of the original Olympic games. What a glorious place. Bringing the Olympics back home is a noble idea - in an important sense, they belong to the Greeks, after all. But will hosting the games be worth the price to Greece?

Here's a sobering editorial in Greece's Kathimerini, pointing out that cost overruns of about 4 billion euros - almost double the initial estimate - will be a strain on the economy for years to come.

The trademark steel-and-glass roof for the main Olympic stadium slid into place last week, fueling hopes that Athens will eventually fulfill the commitments made in its bid for the Games. However, there remains a crucial aspect on which Greece has departed from its earlier promises - save that this aspect is of no interest to the International Olympic Committee (IOC), the foreign teams, and the visitors who will flock into the capital: The cost of the Summer Games is expected to verify the most ominous forecasts and hover at 8.8 billion euros (3 trillion drachmas) - by far exceeding the official projections of 4.7 billion euros (1.6 trillion drachmas).

The government's decision to resort to emergency borrowing worth 5.75 billion euros (regardless of questions about the way in which these were contracted) is a sign of the mammoth-sized economic burden that Greek taxpayers will have to shoulder because of the Games.

To put these figures in perspective, Greece's GDP in 2002 was 141 billion euros. Greece is thus spending 5 1/2 to 6% of its GDP in order to stage a two and a half week event. It is indeed a "mammoth-sized" undertaking, and debt-finance is the only way it can be managed. Satisfying the creditors without steep tax increases in the next few years will be critical to Greece's economy. With public debt already about equal to GDP, Greece is well outside the EU guideline of 60%. They are in much better fiscal shape than ten years ago, but still have a tricky problem to navigate. Good luck to them.