Current Athenian Effort to Boost the Economy: Has Olympian Hype Helped - Essay Example

Current Athenian Effort to Boost the Economy: Has Olympian Hype Helped The Greek economy is worth watching. Within fairly recent times, it has enjoyed an unprecedented period of growth, (Fairlamb, 2004, pg. 28) one that certainly could not have been predicted considering its rocky start in the mid-twentieth century. (Background Notes on Countries of the World, Oct. 2003, pg. 1) However, presently, this period of growth rests rather precariously upon its standing within the European Union, (Background Notes on Countries of the World, Oct. 1996, pg. 2) as well as a market that threatens to deflate just two years after the exhilarating but financially exhausting Olympic Games held in Athens. (OECD Territorial Reviews-Athens, Greece, 2004) Clearly, the success of its economy relies heavily upon foreign funds, (Kerin Hope, Oct. 97, pg. 13) whether in the form of tourism, or via loans from the European Union. Can this period of relative affluence be sustained, what role has the Olympic games in Athens played within the current Greek economy, and does it hold the key to maintaining prosperity History During World War Two, Greece displayed courage worthy of the history books by defying the Axis powers. Unfortunately, after the Allied victory, members of the resistance aligned themselves against the newly established Greek government and thus the Greek Civil War was born, (Iatrides & Rizopoulous, spring 2000, pg. 87) plunging Greece into almost a decade of financial struggle which was then relieved by foreign aid. (Geographic Distribution of Foreign Aid Since WW 2, section 4) "Greece's landscape was devastated by violence and poverty. In 1947, U.S. President Harry S. Truman gave Greece three hundred million dollars of military and economic aid, ensuring a temporary victory over communism." ("Focus on Geography," page 1.) This paved the way for the "Greek Economic Miracle" of the fifties. "The period between the late 1950s and late 1960s has been characterized as the era of the 'Greek Economic Miracle', during which GDR grew at the fastest rate in Western Europe, averaging 7.6 % annually throughout the 60s." ("Comparative Analysis of Greek and Bulgarian Economies, page 1.) The seventies saw an end to the "good times," of the Greek economy: "In the mid-1970s, Greece suffered declines in its GDP growth rate, ratio of investment to GDP, and productivity, and real labor costs and oil prices rose." ("Background Notes on Countries of the World," page 1.) At the dawn of the eighties, Greece pursued membership with the European Union (World Affairs, Spring 2002, pg. 178) for economic and political security. (West European Politics, March 2005, pg. 471) In the 90s, Greece continued to focus mainly on its membership within the EU, and the achievement of this endeavour was realized at the beginning of the new millenium. "The government has succeeded in reducing budget deficits and inflation, two key factors that allowed Greece to join the Economic and Monetary Union (EMU) on January 1, 2001. On January 1, 2002, Greece, along with 11 out of its 14 EU partners, adopted the euro as its new common currency."(Background Notes on Countries of the World, Oct. 2003, pg. 3) European Union Membership to the European Union has qualified Greece for substantial grants to promote economic growth, both shortly after its inception, ("In October 1985, supported by a 1.7 billion European currency unit (ecu) loan from the European Union (EU), the government implemented a two-year 'stabilization' program with limited success." [Background Notes: Greece, October 1996, page 1] )14 as well as in recent years: "Although living standards have risen steadily since Greece joined the then-European Community in 1981, it still qualifies for generous handouts from Brussels as the poorest member state in the Union. "A big chunk of Greece's ecu 15 billion ($16.8 billion) share of the current EU aid package for less developed EU members is being spent on modernising infrastructure." About half of the funds directed to Athens will be spent on a handful of transportation projects intended to attract investment and promote exports." (EU Assistance: Constructing a Modern Greece, pg. 13) EU membership has also given Greece political benefits as well. "There is a view-albeit controversial-that the primary rationale for the Greek application for full membershipwas in fact not democratic consolidation or economic growth, but rather security. The EC was viewed primarily as a 'system of political solidarity', which could guarantee the external security of Greece especially in relation to its regional tension with Turkey (Valinakis 1994: 200). The longevity of this view is reinforced by the pronouncements of the Greek Prime Minister Mitsotakis, a decade after accession, stating that 'Europe offers us security' and when reaffirming that the political rationale for EC membership superseded the economic one, whereby 'Our frontiers will henceforth be defended by the united Europe' (Valinakis 1994: 208)." (Econimides, "The Europeanisation of Greek Foreign Policy," pg. 473.) Inclusion in the EU has benefited Greek students as well. "Rapid industrialization in Greece in the 1960s and early 1970s dramatically increased the demand for education, particularly at the tertiary level. The government sets quotas for new entrants to universities, but they are far below the social demand for higher education. Only 25 percent of the college-age cohort is enrolled in higher education in Greece, the lowest percentage in the EU. "The solution for this unmet demand for higher education has been study abroad. Greece has the second largest percentage of students studying abroad, surpassed only by Luxembourg, which has no university-level institutions. Students not admitted to universities in Greece tend to study in Italy, Germany, France, and the United Kingdom. These countries have policies of no higher tuition costs for students from other EU member countries (Sianou, 1991)." ("Human Resources for Science and Technology: The European Region," 2006) Athens and the Olympic Games It may be argued that membership in the European Union made the rest of the world more comfortable to engage itself with Greece than otherwise would have been the case. This comfort has led to one of the most exciting events, financially and otherwise, for Greece: the 2004 Olympics, held in Athens. Such an event was a financial gamble for Athenians. In years prior to the Olympics, the Greek economy was very healthy in general. In 2000, it met the requirements of the EU's convergence program as estimated by the Lisbon Summit by mid-summer of that year, which allowed Greece entry into the Euro zone. Although not perfect, (inflation was just under one percent higher than it had been at the close of the previous year) it cannot be denied that overall, financially speaking the previous few years had been a success, with a more accelerated rate of economic growth than the rest of Europe, a robust state of investments both in the public and private sector, as well as increased spending. ("The Greek Economy, 1999-2000," 2005) The Athenian economy itself, however, did not fare nearly as well as that of the rest of the country. "The year 2000 was marked by high volatility on the Athens Stock Exchange together with a drop in volumes traded. However the opportunity was seized by the Regulatory Authorities for streamlining and updating controlling procedures and fostering the safety and further development of trading activity and transparency. The Athens General Index closed at 3,388.9 units in December 2000, thus marking a 38.8% drop to December 1999. The average daily volume of trade was at Grd 150 billion (Euro 440.5 million) compared to Grd 240 billion in 1999 (Euro 704.3 million) and Grd 75 billion in 1998 (Euro 220 million). Total capitalization in December 2000 was at Grd 40.2 trillion compared to Grd 67.3 trillion in December 1999. This downward correction is perceived to be the result of 'overheating' during 1999." ("The Greek Economy, 1999-2000," 2005) Was the hosting of the Olympic games Athens' opportunity to cure its monetary ills Many seemed to think so. If nothing else, Athens would perhaps gain from a much-needed facelift, which would help with tourism, one substantial part of the economy of Greece, overall. ("World Info Zone," March, 1997) In spite of its romantic past, and Greece's draw for tourists, Athens itself remained a city that was less-than-hospitable towards tourists. "Athens is often a city remembered as much for its smog and stray dogs as for its antiquities. Too many cars, insolent drivers, and a lack of pedestrian walkways make exploring the city on foot a death-defying experience. The Parthenon has been shrouded in scaffolding for almost twenty years. The sorry state of many ancient monuments and museums around the country is cause for embarrassment and alarm." ("Does Greece Need the Olympics" Jul/Aug 2004) Prior to the hosting of the games, there was much speculation concerning the cost involved, as well as if Greece could pull it off. "Greece isthe smallest country to hold the Olympics in more than fifty years (since Finland in 1952) and also one of the poorest. The capital and organizational resources that made such Games as Sydney 2000 a success are lacking in this nation often considered a Third World country by the rest of Europe. Harsh media criticism of Greece's lack of preparedness has been the rule from the start." ("Does Greece Need the Olympics" Jul/Aug 2004) This view of Greece is hardly unfounded. Recent gains aside, (as referenced above) its enormous debt (Economic Survey of Greece, 2005: The Fiscal Years, July 2005) (see Graph 1) and its relatively low GDP (see graph 2) added to the price of making Athens hospitable to outsiders and the time constraints involved made for a worrisome outlook. "This year's Olympics are a test for the nerves of insurance underwriters. The opening ceremony in Athens is just four months away," writes the Economist, in its April 24th, 2004 issue, "and omens are bad. Greek construction workers, when they are not on strike are scrambling to finish the Olympic stadium. The tram system is still a work in progress; the swimming pool will not have a roof. Then there are the ubiquitous worries about terrorism and security arrangements. David Bruce, an underwriter at Hiscoxsays they are sure to get it [a cancellation and disruption policy covering Athens and subsequent games] done in time. He estimates that total coverage for the Olympics-including broadcasters, advertisers, sponsors and so forth, as well as the 10C-will run to between $500m and $1 billion."("Uncovered," April 24) Public sector balance and the debt-to-GDP ratio1 Per cent of GDP, 2004 Athens, Post Olympics Were the Olympics worth it, financially The Olympic Games were a success, in the sense that it left the city of Athens remarkably different from before."[Athenians] bask in the knowledge that the city will come away with a radically revamped infrastructure, much of which had been planned earlier but was accelerated for completion in time for the games. Improvements include impressive new stadiums, but also a new airport, rehabilitated buildings and squares, a new metro system, new highways, and dozens of renovated hotels and museums." (Architectural Record, July 2004, pg. 53) "Will Athens be left a better place" asks Richard Ingersoll, in the July 2004 version of Architecture. "The Olympics after all, usher in a brutal, two-week invasion of 10,000 athletes, a 20,000 strong press corps, 3,000 officials, and hundreds of fans. To its credit, the projects planned by Athens, somewhat on the model of the transformation of Barcelona in 1992, have been conceived on a comprehensive scale with an ulterior goal of modernising the city's infrastructure." (Ingersoll, July 2004, pg. 15) Make no mistake about it, however, these improvements have come at a cost. "Well, for a fortnight it was a splendid party. Now for the Olympic bills-and that hangover will last for years. The Greek Olympic committee reckons it can break even: half of its $2.3 billion budget for running the games will come, via the International Olympic Committee, from broadcasters, most of the rest from commercial sponsors, ticket sales and merchandising. But what about the taxpayer Overall, Greek and (modestly) other European Union taxpayers have spent $300m helping to run the games, nearly $1.5 billion keeping them secure, and some $7 billion preparing facilities for them. In all, that means that near 5% of 2003 Greek GDP, roughly $800 for every single inhabitant, pensioner or babe, taxpayer or not." (Economist, 09/04/2004, 53) Greece's economy has, in fact, picked up in recent years. Although Greece did in fact spend billions of dollars, aside from the very real benefit of a vastly improved infrastructure, another benefit (and the direct cause of Greece's recent economic success) has been the investment of those billions of dollars into its economy. Athens' Lasting Impact on Greek Economy However, has an improved infrastructure and a brief surge in profits for construction companies, hotels and restaurants made up the difference Not likely. Although Greece did, indeed grow in recent years, financially, the debt that it incurred in order to gain that growth, coupled with the fact that it has made itself more "financially stable" than other countries has not been to its advantage. "During the lead-up to the Games, development contributed to a booming economy. The country's average economic growth rate of more than 4 percent a year was well over the European Union average. As one of the poorest EU countries at the time, Greece was receiving hefty EU subsidies for development. But with 10 more nations now in the EU, those subsidies will be funneled to poorer countries." (Davenport, September 2004, pg 7) "With the end of major development comes the beginning of payback. Greece's public debt is close to 100 percent of its GDP and its budget deficit is now 3.2 percent, which breaches the 3 percent limit set by the European Commission. The EC has demanded Greece devise a plan in three months to reduce the debts. Meanwhile, Athenians are preparing to tighten their belts for at least the next decade. City of Athens spokesman Dimitris Katsoudas is optimistic about the investment to his city, but echoes Greek officials throughout the government: 'This was a gamble. For the final answer, you'll have to ask again in 10 years.'" (Davenport, September 2004, pg 7) Works Referenced Davenport, Coral. "A Post-Olympic Hurdle for Greece: the Whopping Bill." Christian Science Monitor, September 1, 2004, Vol. 96, Issue 195, pg. 7. "Despite Some Rough Edges, Athens Should (Just About) Be Ready for the Olympics, as a City Transformed." Architectural Record, July 2004, Vol. 192, Issue 7, pg. 53 "Economic Survey of Greece 2005: Key Challenges in the Short and Medium Term." http://www.oecd.org/document/21/0,2340,en_33873108_33873421_35059669_1_1_1_1,00.html under "Decomposing the Income Gap." Accessed April 20, 2006. Economides, Spiros. "The Europeanisation of Greek Foreign Policy." West European Politics, March 2005, vol. 28, #2, pg. 471. Fairlamb, David. "A Gold Medal Boost for Growth." Business Week, 7/26/2004, Issue 3893, pg 28 "Greece," Background Notes on Countries of the World. October, 2003, pg. 1. http://search.epnet.com/login.aspxdirect=true&db=afh&an=11227804&loginpage=Login.asp&site=ehost&scope=site "Greece," Background Notes on Countries of the World. Oct. 96, http://search.epnet.com/login.aspxdirect=true&db=afh&an=11227804&loginpage=Login.asp&site=ehost&scope=site "Hellenic Republic," Background Notes on Countries of the World. October2003, pg 2. http://search.epnet.com/login.aspxdirect=true&db=afh&an=11227804&loginpage=Login.asp&site=ehost&scope=site Hope, Kerin. "EU Assistance: Constructing a Modern Greece." Europe, Oct. 97, Issue 370, pg. 13. "Human Resources for Science and Technology: The European Region," under "Greece." http://www.nsf.gov/statistics/nsf96316/othereu.htm Iatrides, John O., Rizopoulos, Nicholas X. "The International Dimension of the Greek Civil War." World Policy Journal, Spring 2000, Vol. 17, Issue 1, pg. 87. Ingersoll, Richard. "My Big Fat Greek Olympics." Architecture, Jul. 2004, Vol. 93, Issue 7, pg. 15 "Legal Framework," "The Athens Stock Exchange" http://www.agii.gr/economy.htm, accessed April 20, 2006 "Legal Framework," "The Greek Economy: 1999-2000" http://www.agii.gr/economy.htm, accessed April 20, 2006 Lobell, Jarrett A. "Does Greece Need the Olympics" Archaeology, July/Aug 2004, Vol. 57, Issue 4, pg. 38 "A Matter of Priorities," Economist, September 4, 2004, Vol. 372, Issue 8391. McHenry, Stewart. "Greece." Focus on Geography. Spring 2003, Vol. 47, Issue 3, pg. 1 "OECD Recommends Strategic Planning for Athens Post-Olympics." April 2006. http://www.oecd.org/document/18/0,2340,en_2649_201185_31824274_1_1_1_1,00.html "The Politics of European Enlargement: NATO, the EU, and the New U.S.-European Relationship." World Affairs. Spring, 2002, Vol. 164, Issue 4, pg 178. "World InfoZone-Greece." Page 2, under "Economy." Last updated March 1997. http://www.worldinfozone.com/country.phpcountry=Greece&page=2, accessed April 20, 2006. "Role of Foreign Aid in Development." Section 4 of 9, "Geographic Distribution of Foreign Aid Since WW 2" Chapter 2, "The Flow of Foreign Aid and Private Capital to Developing Countries." http://www.cbo.gov/showdoc.cfmindex=8&sequence=3 Read More