Olympic Errors Since Greece Joined the Eurozone

"In a sense the 2004 Olympics mirrored Greece’s Euro membership: A progressive vision that was undone by a lack of foresight and poor, bordering on criminal, management. Greek taxpayers, who were largely the victims rather than perpetrators, are the ones footing the bill 10 years later. Nobody else has accepted any responsibility for what went wrong. For Greek taxpayers there are no gold medals, juicy public contracts, fat salaries or fame. As a result of others’ failings, they cannot even see a finishing line in sight. This more than anything else tarnishes the legacy of the Athens Games".

This is the conclusion of a brilliant article by Nick Malkoutzis in Macropolis. Contrary to most commentaries, it does not make the 2004 Olympics the prototype of Greek failings (except for the event itself). Instead, it puts the Olympics into the context of time; the symptom of something rather than the cause of it. "The Athens Games epitomised the structural problems - such as poor political management, lack of transparency, inadequate planning and fiscal irresponsibility - that bedevilled the country for many years before it finally buckled in 2009. They arrived after Euro entry, when austerity was set aside and purse strings were loosened, backed by cheaper but unsustainable debt".

There are times when individuals seem to lose their senses and there are times when entire societies seem to lose their senses. How they lose their senses seems to be a cultural thing. When the Germans lost their senses in the 20th century, they tended to become violent and evil. When American financial players began to lose their senses by the late 1990s, they fired up the dot.com bubble only to be followed by the sub-prime bubble. When the Greeks began losing their senses with the arrival of cheap money after Euro entry, they focused on what they do best --- enjoy life to the fullest. 

If I had to pick a society where I could not imagine that they would ever lose their senses, I would have to pick the Swiss. The Swiss just don't seem to be capable of ever getting carried away with something. Whereas an Islamic terrorist might lose his mind when he arrives in heaven and sees the 71 virgins, a Swiss arriving in heaven might first of all count the virgins to make sure that they number 71. Perhaps that is their Protestant culture; perhaps it is something else. 

I wonder what Greek leadership would have said if, back in 2000, someone had told them that, over the next 10 years, a total of 300 BEUR of cheap foreign money would be showered upon the country. While they would presumably have been very happy about that, I would think that at least the serious people among them would have been concerned what such a tsunami of cheap money could do if its application is not steered in the right direction.

The trouble with capital flows during the build-up of a bubble is that they do not come all at once. They come in stages with increasing amounts at each stage. And every time a new stage is successfully ignited, it reassures the players that everything is fine and dandy. The 2004 Olympics were a huge such stage; a stage so huge that some people might have thought that this would be the end of the line in Greece's ability to attract more cheap money for undefined purposes. Instead, it only accelerated the process: "The Athens Games fitted into a broader pattern of the time, when the magnificence of the “grand projects” of the period obscured the finer, but crucial, detail".

On one hand, the entire Greek society benefitted from that tsunami of cheap money. When 300 BEUR are showered upon an economy the size of Greece's in the 2000s, the trickle-down effect makes sure that at least some of it lands in the most remote corners of society. On the other hand, even if wage/salary earners doubled or tripled their wages/salaries and even if pensioners doubled or tripled their pensions, they won't become multi-millionaires because of it, certainly not within 10 years. That's not the big money.

If one could look at all Greeks who have a net worth of, say, one million Euro or more today and if one could compare their combined net worth of today to the combined net worth they had 10 years ago, one would probably find that the increase in net worth accounts for a very large portion of the debt which Greece built up during these years. That's a guess of mine but I would bet money on it!

What Greece has seen since the Euro is a huge transfer of wealth to the country from abroad. Why is sovereign debt a transfer of wealth? Because all the money which the state borrows the state spends and to the extent that the state spends its money domestically, it generates income for private economic agents within the country. That might still have been ok if the private income triggered by the state's spending had been evenly distributed. The truth is that the bulk of that income went to a minority of the population.

When all is said and done about Greece's current misery, one could paraphrase Churchill and say: "Never in history have so many paid for the wealth of so few!"

In a sense the Olympics mirrored Greece’s euro membership: A progressive vision that was undone by a lack of foresight and poor, bordering on criminal, management. - See more at: http://www.macropolis.gr/?i=portal.en.the-agora.1435&itemId=1435#sthash.ugMyIQlZ.dpuf