Greece reaches deal with creditors, avoids euro exit

By Pan Pylas And Raf Casert, AP, Jul 13, 2015

BRUSSELS (AP)–After months of acrimony, Greece finally clinched a bailout agreement with its European creditors on Monday that will, if implemented, secure the country’s place in the euro and avoid financial collapse.

The terms of the deal, however, will be painful both for Greeks and their radical left-led government, which since its election in January had vowed to stand up to the creditors and reject the budget cuts they have been demanding.

Before it can get 85 billion euros ($95.07 billion) in bailout cash and support for its banks to reopen, the Greek government will have to pass a raft of austerity measures that include sales tax increases, reforms to pensions, and labor market reforms.

Greece will be on a tight timetable to implement its reforms–a reflection of how little its creditors trust the government to honor a deal. Greek Prime Minister Alexis Tsipras infuriated his European partners last month when he called for a popular vote against economic reforms the creditors has proposed.

The Greek people voted against those proposals, but will be horrified to see that they now face even tougher measures.

Both sides acknowledged the bitterness that marked their negotiations and kept them negotiating nine hours past a Sunday midnight deadline.

“Trust needs to be rebuilt,” said German Chancellor Angela Merkel, adding that with the deal, “Greece has a chance to return to the path of growth.”

In a first step toward getting its bailout loans, the Greek government has to pass a set of measures into law by Wednesday.

Measures include an increase in the sales tax and reform of the pension system. In later weeks, Greece will have to open to competition industries that have long been protected, such as the energy sector. Labor laws will be made more flexible.

If it meets these requirements, Greece will get a three-year rescue program and a commitment to restructure its debt, which is unsustainably high at around 320 billion euros, or around 180 percent of annual GDP.

Tsipras argues that because of these concessions Monday’s deal is, despite the tough austerity, actually better for Greece than the proposals Greeks voted down just a week ago.

“We managed to avoid the most extreme measures,” Tsipras said. “Greece will fight to return to growth and to reclaim its lost sovereignty.”

He said he had managed to avoid a demand by some creditors to transfer Greek assets abroad as a form of collateral and to avoid the collapse of the banking sector.

Greeks seemed mainly relieved that the country was not facing financial collapse.

Kostas Lambos, a pensioner, said things would be “difficult in the beginning” but people had to understand the severity of the situation.

“This was a necessary step for the country to emerge from the dead ends that had been created in the last few years,” he said.

Greece’s banks, which have been shut for two weeks, were still closed on Monday and limits remained on cash withdrawals. Without a deal, they faced the prospect of collapse within days as they are steadily drained of money.

When the banks will be able to reopen will depend on whether the European Central Bank decides to increase emergency credit to Greek banks now that a bailout deal with Greece has been clinched in principle. It was unclear whether the ECB would make such a decision on Monday or after Greece passes its first batch of reforms.

French President Francois Hollande said the Greek parliament would convene within hours to adopt the reforms called for in the plan and he celebrated Greece’s continued membership in the euro.

Losing Greece, he said, would have been akin to losing “the heart of our civilization.”

Other European officials were less emotive.

“The Greeks have to show they’re credible, show that they mean it,” said Jeroen Dijsselbloem, president of the eurogroup of eurozone finance ministers and a longtime critic of the Tsipras government.

If the talks had failed, Greece could have faced bankruptcy and a possible exit from the euro, the European single currency that the country has been a part of since 2002. No country has ever left the joint currency, which launched in 1999, and there is no mechanism in place for one to do so.

Greece had requested a three-year, 53.5 billion-euro ($59.5 billion) financial package, but that number grew larger by tens of billions as the negotiations dragged on and the leaders calculated how much Greece will need to stay solvent.

Greece has received two previous bailouts, totaling 240 billion euros ($268 billion), in return for deep spending cuts, tax increases and reforms from successive governments. Although the country’s annual budget deficit has come down dramatically, Greece’s debt burden has increased as the economy has shrunk by a quarter.

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Greeks Reject Bailout Terms in Rebuff to European Leaders

By Suzanne Daley, NY Times, July 5, 2015

ATHENS–Greeks delivered a shocking rebuff to Europe’s leaders on Sunday, decisively rejecting a deal offered by the country’s creditors in a historic vote that could redefine Greece’s place in Europe and shake the Continent’s financial stability.

As celebrants gathered in Athens’s central Syntagma Square, the Interior Ministry reported that with almost 90 percent of the vote tallied, 61 percent of the voters had said no to a deal that would have imposed greater austerity measures on the beleaguered country.

The no votes carried virtually every district in the country, handing a sweeping victory to Prime Minister Alexis Tsipras, a leftist who came to power in January vowing to reject new austerity measures, which he called an injustice and economically self-defeating. Late last month he walked away from negotiations in frustration at the creditors’ demands, called the referendum and urged Greeks to vote no as a way to give him more bargaining power.

While Mr. Tsipras now appears to have his wish, his victory in the referendum settled little, since the creditors’ offer is no longer on the table. There remains the possibility that they could walk away, leaving Greece facing default, financial collapse and expulsion from the eurozone and, in the worst case, from the European Union.

At stake, however, may be far more than Greece’s place in Europe, as experts have offered wildly differing opinions about what the referendum could mean for the future of the euro and, indeed, the world’s financial markets.

The vote took place under what some analysts called a financial carpet bombing. The European Central Bank severely limited financial assistance to Greek banks, forcing them to close a week before the referendum, making it hard for retirees to get their money and raising widespread fear here that people would lose their deposits.

The news media, dominated by Greek oligarchs, saturated the airwaves and the newspapers with stories about losing gasoline and medicines, while the plight of elderly pensioners was afforded far more attention than in the past, media experts said.

Nonetheless, many voters, tired of more than five years of soaring unemployment and a collapsing economy, said they could not accept the terms of the European offer, which imposed yet more pension cuts and tax increases, without any hint of debt relief.

As word spread of a likely victory for the no vote, people began gathering in Syntagma Square. They streamed out of the metro–which is free in this week of capital controls–and drove by, honking horns. Vendors sold Greek flags, and there was a peaceful, celebratory atmosphere.

For some voters, the week of hardship–they could withdraw only 60 euros, or about $67, a day from A.T.M.s, and already some pharmacists were refusing to fill prescriptions–only strengthened their sense that Greece needed to stand up for itself.

After five years in which unemployment soared beyond 20 percent and the country’s economy contracted by 25 percent, many said that a no vote was at least a vote for hope, the possibility of a new deal, rather than following the mandates of creditors who had failed to set Greece on a course to recovery.

For others, the hardship only proved that Greece, like it or not, was in the hands of its creditors and could do little but take whatever terms were being offered–the alternative of default, financial collapse and withdrawal from the euro being unthinkable. In many cases, they blamed Mr. Tsipras’s young government for having returned the country to recession when it had shown small signs of recovery just before the January elections.

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The forgotten origins of Greece’s crisis will make you think twice about who’s to blame

By Ana Swanson, Washington Post, July 1, 2015

Stop me if you’ve heard this one.

The Greeks, Italians, Spaniards and Irish walk into a bar, where the French and Germans are the bartenders. It’s happy hour, and the Germans and the French are serving half-price drinks. Although everyone quickly drinks too much, the bartenders keep on serving. Eventually, the inebriated customers head home and get into all kinds of trouble–fights, car accidents, some broken windows.

So who’s to blame? Clearly, the Greeks shouldn’t have drunk so much. However, the French and Germans also shouldn’t have served the Greeks when they were clearly drunk–especially if the French and Germans mind having broken glass in their neighborhood.

Unfortunately, this isn’t much of a joke. After an extended binge, Greece is now mired in financial crisis and is dragging the European economy down with it. In the last few days, Greece has defaulted on a important payment to the IMF and shuttered its banks to prevent massive flows of money from leaving the country. On Sunday, the country is slated to hold a referendum on whether to approve tough austerity measures demanded by Europe–a decision that could determine whether Greece will stay in the euro zone.

Some of the reasons for the crisis are obvious to anyone who looks. Greece has a lot of well-recognized economic problems: Its public sector is bloated and marred by corruption, and many analysts say that the country cooked its books to hide the real amount of debt from the rest of Europe.

There are also many well-documented problems stemming from the design of the euro zone itself–that the countries share a common currency even though they have different tax-and-spending policies. So that means that even though Greek workers aren’t as economically competitive as Germans, Greece can’t lower the value of its currency to make its products cheaper abroad and stimulate exports.

The same holds true for inflation, where Greece might benefit from a higher inflation rate that would make debt in today’s prices become cheaper, while Germany has a historic unease with any policy that might stimulate inflation.

There are some other ideas about the deeper origins of the Greek crisis that you may be less familiar with.

Once the Greeks joined the euro in 2002, they could borrow at very cheap rates given they were now borrowing under the continent’s implicit guarantee, and they dramatically over-borrowed.

“But given that there was high growth, no one was really worried about it,” says Matthias Matthijs, a professor at Johns Hopkins University SAIS and co-editor of the new book, “The Future of the Euro,” who relayed the bar metaphor.

Between 1998 and 2007, Greece’s annual economic growth per person was 3.8 percent–the second fastest rate in Europe.

But there were weaknesses within. The booming economy in Greece and other countries such as Ireland and Spain caused prices to rise, and the countries gave generous pay rises to their workers, which made their exports more expensive. That made the countries less competitive, but since they were growing so fast, it didn’t matter too much.

Then the financial crisis hit. As economic growth slowed, these countries’ competitive weaknesses and unsustainable debt loads suddenly became glaringly obvious.

“It’s when the tide goes out that you see who’s swimming naked,” Matthijs says.

Matthijs says there is a lesser known narrative he finds more compelling. Basically, he says, it helps to explain why the bartenders kept on serving.

In the mid-1990s, even before it came into existence, markets made a huge bet that the euro would be a reality. Specifically, investors, many in northern Europe, bet that interest rates in northern and southern Europe would converge. At the time, interest rates in southern Europe were much higher than in northern Europe, simply because people thought investing in countries like Greece was much riskier than investing in countries like Germany.

In anticipation of the euro zone, investors put lots of money in the cheap, high-yielding bonds of southern Europe. That helped to drive down yields and fueled borrowing and an economic boom in southern countries.

Ultimately, investors were right–Greek interest rates on 10-year bonds fell from around 20 percent in the early 1990s to only 3 percent in 2002. “They made a lot of money in the north betting against higher interest rates there. That fueled the boom, before the euro came, that overheated these economies.”

As economies overheated, it’s not a surprise that their competitiveness suffered, says Matthijs.

In short, many in the north pushed for a financial regime that didn’t fit the Greek economy, because they personally stood to benefit. Many rightly blame the Greeks for its current crisis, but some of the blame belongs farther north as well, he argues.

Matthijs compares the situation to the U.S. subprime crisis. Who was really at fault for the housing crisis in the U.S.: The subprime borrowers who bought houses they couldn’t afford, or the predatory lenders who encouraged them to take them out?

“The Germans don’t like that comparison. But they were greedy. They wanted the higher yielding bonds there, they wanted to invest there,” he says of southern Europe.

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Greeks Line Up for Money and Stock Up on Goods as Cash Rationing Starts

By Anemona Hartocollis, NY Times, June 29, 2015

ATHENS–Uncertain what might happen next, with banks and financial markets closed, across Athens people wasted little time Monday, rushing to the nearest A.T.M. to withdraw their new daily maximum of 60 euros, determined to raise every last cent while they could.

Yet, even as Greeks faced a new level of chaos and hardship this week, they were being confronted with another unsolvable riddle: a vote on their future that was even more uncertain than the current chaos.

“Simply put, we’re confused,” Eleni Gardikioti, 31, an insurance worker, said. “We don’t understand what games they are playing, whether to stay or go and whether there is a permanent goal in all that.”

There were good arguments on each side, she said, as she fished out a coin to give to a beggar.

In a referendum on Sunday, Greeks will be asked to decide whether to accept a take-it-or-leave-it bailout offer by the country’s creditors, and remain mired in austerity in the eurozone, or reject the deal but suffer the consequences of leaving the euro.

The question is not as simple as it might sound. For one, the bailout offer has already been withdrawn by the eurozone’s finance ministers, so it is not clear the parties could reach a deal now even if Greece voted in favor.

Prime Minister Alexis Tsipras clouded the matter further on Monday by saying a vote against the deal would not necessarily mean abandoning the euro, but rather would give him leverage to negotiate a better agreement with Greece’s creditors–other European Union nations, the International Monetary Fund and the European Central Bank.

Anecdotally, how people said they would vote in the referendum had little to do with those considerations, but broke down largely along lines of age and class. Older and more affluent Greeks leaned toward voting yes and younger and poorer Greeks leaned toward no, essentially as a protest of what they viewed as foreign oppression.

Whatever the outcome, Athenians were busy adapting to the new reality on Monday, focusing more on getting through the week than worrying too far into the future. People were emptying supermarket shelves, filling up containers at gas stations and lining up at automated teller machines, hoping that the supply of hard cash would not run out before it was their turn.

Athenians everywhere wore looks of anxiety, despite a pleasantly cool summer day. Over the last few weeks, Greeks have withdrawn billions of euros from the banking system, leading to capital controls. On Monday, customers found many cash machines shut down until noon to be reprogrammed with the new limit. For hours after the machines began operating again, people stood in line, waiting to receive their rations of cash.

Standing outside the cash machines seemed to have a counterintuitive effect on some people, hardening them against the European creditors rather than making them angry at their own government.

“We’re all happy with Tsipras!” said Eleni Hartofilaka, waiting to take her €60 (about $67) out of an Alpha Bank branch. “We’re happy for the Europeans to learn not to be on top of us.”

For some, the word “no,” or “Oxi” in Greek, has a historical symbolism that makes it even more appealing in the present context. As every Greek schoolchild knows, the annual Oxi Day commemorates the answer, in spirit if not verbatim, delivered by Prime Minister Ioannis Metaxas to a demand from Mussolini to allow Italian forces to occupy strategic parts of Greece at the beginning of World War II.

Ms. Gardikioti said that she and her boyfriend had limited savings and little to lose. Even if a no vote meant a retreat to the previous Greek currency, the drachma, after a period of hardship, the Greeks would recover.

At the Evangelismos Metro station near Central Athens, Dimitra Papaioannou, 30, had just taken a free subway ride, after coming to the city by bus from the northern town of Larissa to visit her doctor. She had arrived in Athens with almost no cash because the A.T.M.’s in her hometown had been bled dry.

She said she had not decided whether she would vote on Sunday, but if she did, she would vote no to the European bailout proposal. Unlike city folk, she could be self-sufficient, she said, rolling a cigarette.

“I will go to the village and dig to live,” she said. “I believe no one should fear. Here in Athens, they will go hungry. In the village we have our field, a chicken. Of course, doctors we won’t have, or maybe.”

A few blocks away, the A/B Vasilopoulos supermarket, a major chain, was mobbed, as though a major hurricane were on the way. A cashier said she was exhausted as she rang up groceries at lunchtime. “You should have seen it this morning,” she said.

Discounted Pampers were sold out, and people were forced to buy the more expensive version. Housewives were leaving with gigantic bundles of toilet paper. The cheapest brands of olive oil and pasta had sold out. Stock clerks were everywhere, replenishing supplies of everything from sugar to frozen vegetables.

“Don’t panic,” one woman urged another, as she picked over the noodles. “I think the Greek companies like Misko will still be producing pasta even if we cannot import it.” Italian ravioli, she added, examining a package, maybe not.

Several people said that the general mood had become so distressed and polarized that people were talking about the possibility of civil war. Mr. Tsipras seemed to be alluding to such fears in his brief speech Sunday night announcing the capital controls. He urged “dignity” and “calm” and echoing Franklin D. Roosevelt, said “Our only fear is fear.”

At a small but elegant antiques store, Art & Craft, the proprietor, Miltiades Macrygiannis, actually had a customer, though, he noted after she left, she spoke Greek with an accent, indicating that she was foreign.

Surrounded by hanging lamps, carved mirrors, old worry beads and objects bearing the evil eye, to ward away evil, Mr. Macrygiannis said that like most businesses, he could not get cash to replenish his stock now that cash controls were in effect.

He planned to vote yes, but reluctantly, as the lesser of two bad choices. “I wouldn’t imagine, even as a nightmare, the scenario of going back to the drachma,” Mr. Macrygiannis said. “It would take 10 years to get us back on our feet again.”

On the other hand, “You can say yes to this agreement, a very painful agreement, and it means too many taxes, cutting down on pensions.”

Those who will gain, he said, are the superrich who have squirreled away their euros in Switzerland or the Virgin Islands, and will be able to swoop in to buy devalued goods and property.

What upset him most, he said, was the uncertainty. “The Greek government right now, they don’t give me the next day,” he said. “They ask us to vote no. Then at least tell me what is going to happen the day after.”

He added: “We fought to be in the European Union for so many years. Greece will not be in Europe but countries like Bulgaria and Romania will? It sounds like a bad joke.”

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Greeks face new uncertainty as vote called on bailout

By Demetris Nellas, AP, Jun 27, 2015

ATHENS, Greece (AP)–Anxiety over Greece’s future swelled on Saturday, with people queuing outside banks to withdraw cash, after Prime Minister Alexis Tsipras’ call for the people to vote on a proposed bailout deal increased the risks that the country might fall out of the euro.

The call for a vote has strained relations to a near breaking point between Greece and its creditors, some of which say there may be little left to do to save Greece after five months of fruitless and frustrating talks. The sides are haggling over the reforms the country needs to make in exchange for more financial support but have managed to only increase uncertainty over the country’s financial future.

Greece has a debt due on Tuesday and its bailout program expires the same day, after which it is unclear whether its banks would be able to avoid collapse, an event that could be the precursor to Greece leaving the euro.

The Greek Parliament is debating and will vote at midnight Saturday on the government’s request for a referendum, as finance ministers from the 19 euro countries, Greece’s main creditors, gathered to discuss the situation in Brussels.

Across Athens, people started flocking to cash machines shortly after Tsipras announced the referendum just after 1 a.m. local time. The queues grew the next day, though the number of people and the availability of cash varied widely. The Bank of Greece assured in a statement Saturday that the flow of cash will not be interrupted.

The concern over what awaits the country in the hours and days to come was palpable. At one branch of Pireaus Bank in central Athens, one of very few that opens on Saturdays, about 50 people queued up in the early morning before they found out the bank would not open at all. An elderly woman fainted.

The referendum will ask Greeks to vote on a proposal of reforms that the country’s creditors made on Thursday. The Greek government rejected it as imposing cuts that are too harsh on the general population.

The Greek government said it would recommend Greeks vote “no” in the referendum. What would happen in that case–whether Greece would have to leave the euro or try to renegotiate more time with creditors–is unclear.

Eurozone officials were openly frustrated by the Greek move and increasingly pessimistic.

If it became accepted among European politicians that Greece could not agree on a rescue deal, the European Central Bank could decide to end the emergency credit that it allows Greek banks to draw on. The banks would likely collapse and the Greek government would have to support them itself. Penniless, the government would have to revert to printing a new currency, effectively drawing it out of the euro union.

Such a move would put the country through a new era of economic pain. With the new currency less valuable than the euro, the government would have to write off a chunk of its foreign loans–mainly owed to eurozone countries–and many companies and households would go bankrupt.

The uncertainties of all this would roil European and global markets, though experts are divided on the extent. Some say Europe is better equipped to handle a Greek euro exit, but others note that it is unclear. The euro dropped in value on international markets after the referendum was called.

In the streets of Athens, views were mixed on the merits of holding a referendum.

“The people are not in a position to decide. Those who are in position to decide are the ones that know a bit more and they must explain and simplify the issues for the people,” said Grigoris Kanellopoulos, 41, a street seller of bagels.

Athina Kontosozou, 56, has already made up her made about how she will vote.

“No (to the creditors’ proposals), no to any more measures. We don’t know what will happen (after the referendum). Let’s hope that things will be better. And they will get better. We believe it”.

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Greece Fire, Stop-and-Seize, Texas Gold – New World Next Week

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Will leaving the euro break Greece or make it?

Nick Miller, The Age, June 18, 2015

London: Less than a century ago, Europeans were literally walking across borders with suitcases full of money. Millions of Austro-Hungarian crowns were put in sacks and tied to horses or jammed into boxcars.

That is until they closed the borders and made it illegal.

Before the Grexit, there was the “Austrexit”.

For an insight into the exit of Greece from the euro–how it could happen, and the chaos that may ensue, economist Michael Spencer dials back almost 100 years, to the wreckage of World War I.

With the breakup of the Austro-Hungarian Empire into Austria, Hungary and Czechoslovakia, so too the currency union broke down. Citizens were told they had to bring their old crowns to the post office, to be stamped and thereby turned into new, local currency.

But when you create a new currency, Mr Spencer explains, you get “massive cross-border flows of the old currency”, as everyone tries to move their money to where it will be worth the most.

One estimate is that 6.5 billion crowns, equal to the entire estimated circulation in Hungary, were transferred out of Czechoslovakia and Austria (which faced unprecedented unemployment, huge debt payments and the problem of paying for a big civil service, leading to justified fears the new currency would quickly inflate).

In Czechoslovakia, as the currency separation began, borders were ordered closed and all postal communications abroad were suspended for two weeks. Heads of households were ordered to surrender all their crowns for stamping, and bank deposits were converted at a 1:1 rate. Half of the stamped currency was withheld by the government as a “forced loan”.

In Austria, the government put controls on the sale of securities and stocks to the other states to prevent an influx of notes from Czechoslovakia.

For the record Mr Spencer, chief economist for Deutsche Bank Asia Pacific, is not saying Grexit will happen. They are “still of the view that a deal will get done in the next few days”, making this all just hypothetical.

“The Greeks dislike austerity but they want to stay in the euro … If they put in place capital controls and people in Greece are trading IOUs or tax refund receipts or whatever people come up with … that’s a scenario in which we think the Greek government loses its popular support. [Greek Prime Minister Alexis] Tsipras will do what he needs to do to avoid that outcome.”

But nevertheless, Grexit is on the table, governments are making contingency plans and economists are imagining what it would look like.

In 1994, Mr Spencer co-wrote a paper on the fragmentation of the Austro-Hungarian crown. He still sees it as the “key historical example of a currency union breakup”.

Though things are different now. “Now of course you don’t need to walk across the border, you just log onto your bank account with your security code and transfer money out of the country,” Mr Spencer says. “There’s nothing to stop someone in Greece taking their entire [bank] deposit, transferring it to a bank in France, then living off the ATM.”

There will have to be strict controls on money to stop that happening–the Greek banking system has already lost 40 per cent of its deposits in three years. “It’s going to be absolutely chaotic for a few weeks and the rest of Europe will look on in [horror].”

And there is a lingering hangover.

“My reading of economic history is that when you’ve had these kinds of crises you don’t wake up the next morning saying ‘oh what a relief the currency’s been devalued’, you wake up thinking ‘I am poorer, prices of everything that I want to import have gone up by 40 per cent’. Consumption collapses, imports collapse.

“It’s entirely possible that a year later the economy is growing … but it could be years before Greeks feel that they are better off than they were before the devaluation.”

But other economists disagree.

In 2012, a team from Capital Economics led by Roger Bootle won a £250,000 ($508,000) prize for outlining the “smoothest process by which a member state could exit the Eurozone”.

The model is highly technical, and envisions a “substantial default” of government debt. It proposes top-secret preparations, followed by a public announcement just three days ahead of the new currency being introduced.

Immediately after the announcement, domestic banks and financial markets close to prevent capital flight. There would be no “stamping” of euros into drachmas–instead all wages, prices and bank deposits are immediately converted to the new currency, and “non-cash” means of payment are used until the new money is printed.

Mr Bootle says his plan is not only possible, it’s desirable.

“The main purpose of making such a change is to allow the exchange rate to fall. That should not be resisted by the Greek authorities, it’s part of the solution,” he says. He would expect the drachma to stabilise at more than half the value of the euro.

There is no escaping the need for capital controls and restrictions on the banks, to avoid “financial catastrophe”, Mr Bootle says.

However he doesn’t think the practical challenges of printing a new currency are particularly difficult. People can carry on using euros, or build up credit, or circulate IOUs. “It’s a comparatively minor problem, a short-term thing,” he says.

And the project as a whole is “eminently desirable”, he says.

After the disruption to transactions, and the banking system, and the shock for Greeks as import prices shoot up, the economy would respond and start to recover (helped by a massive upsurge in tourism and a boost to local agriculture and manufacturing).

“I don’t see any way, without this, that Greece can escape from the current mess,” Mr Bootle says. “When people say to me ‘oh wouldn’t an exit from the euro cause a few problems’, I want to know which planet they’re living on. There’s a question of what the alternatives are, and this does offer the prospect of a very real escape.

“It wouldn’t be a disaster, it would be a salvation. In a year’s time people will look back and say–why on Earth didn’t we do that sooner?”

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Athens Olympics leave mixed legacy, 10 years later

By Nicholas Paphitis And Theodora Tongas, AP, Aug 13, 2014

ATHENS, Greece (AP)—In an obscure corner of a park sits a forlorn reminder that, 10 years ago, Athens hosted the 2004 Summer Olympics. The crumbling miniature theater is inscribed with the words “glory, wealth, wisdom, victory, triumph, hero, labor”—and it is where visiting Olympic officials planted an olive sapling that would bear their names for posterity.

Once a symbol of pomp, the marble theater is now an emblem of pointless waste in a venture that left a mixed legacy: a brand-new subway, airport and other vital infrastructure that significantly improved everyday life in a city of 4 million, set against scores of decrepit sports venues built in a mad rush to meet deadlines—with little thought for post-Olympic use.

As Greece groans under a cruel economic depression, questions linger of whether the Athens Games were too ambitious an undertaking for a weak economy. While economists agree it would be unfair to blame the meltdown on the 17-day Games, the post-Olympic era is seen as a decade of lost opportunities—including failure to significantly boost the country’s sporting culture. It’s a lesson to which Brazil may pay heed, as it races to complete projects ahead of the 2016 Olympics in Rio de Janeiro.

“We didn’t take advantage of this dynamic that we got in 2004,” said former Olympic weightlifting champion Pyrros Dimas, a Greek sporting hero turned Socialist member of Parliament. “We simply made the biggest mistake in our history: We switched off, locked up the stadiums, let them fall to pieces, and everything finished there.”

“We spent a lot of money for some projects (that) are shut and rotting,” said Dimas, who won his last Olympic medal in an Athens arena now reinvented as a lecture and conference venue. “There were projects that should have cost 2 and 3 million (euros) and suddenly became so big that they cost 13 and 14 million. There was no control.”

The latest government estimate sets the final cost of the Games at 8.5 billion euros, double the original budget but a drop in the ocean of the country’s subsequent 320 billion-euro debt, which spun out of control after 2008. Former organizing committee chief Gianna Angelopoulos has commissioned the first independent survey of the Olympics’ overall economic effect. It will aim to weigh Olympic overspend and waste against a possible boost to the crucial tourism industry—arrivals have almost doubled since 2004, from 11.7 to 20.1 million—foreign investment and employment.

“The Olympics were very important in increasing the brand awareness … of Greece,” said economist Theodore Krintas, managing director of Attica Wealth Management. “But we did, very, very limited things on a follow-up basis.”

Andrew Zimbalist, a U.S. economist who studies the financial impact of major sporting events, said past experience shows that hosting the Olympics does not generally promote economic development: “At the end of the day, the main benefit to be had seems to be a feel-good experience that the people in the host city or the host country have,” said Zimbalist, a professor of economics at Smith College. “But that’s a fleeting experience, not something that endures.

“Why couldn’t Athens have simply invested … in development and transportation and communications and infrastructure, and not hosted the Olympics?”

In Greece, few of the sporting venues—mostly purpose-built permanent structures—have seen regular post-Olympic use. The badminton venue is a successful concert hall, but the empty table-tennis and gymnastics stadium is up for sale, and the beach volleyball center has been rarely used and was recently looted.

Most venues are padlocked.

The seaside site of Athens’ old airport hosted half a dozen venues. Politicians have dithered for a decade over how to use the sprawling plot—meaning facilities have simply been left to rot. Lengths of large tubing lie near abandoned runways. Decommissioned jumbo jets sit near where planners once dreamed of building a water amusement park.

Greek Olympic Committee head Spyros Capralos, a senior member of the 2004 organizing committee, said the state of the sporting venues “puts our country to shame.” The former swimming champion and two-time Olympic water polo competitor blames bureaucracy and lack of foresight.

“Nobody was thinking what would happen the next day,” he said. “Many of the sports facilities were constructed just to be constructed … and nobody thought that they required a lot of money for maintenance after the Olympic Games.”

Overall, Capralos insisted, the Games were a boost for Greece, mainly due to non-sports infrastructure pegged to the Games that otherwise might never have materialized.

Capralos believes the legacy of the stadiums can still be salvaged.

“Simply, someone must do whatever is needed for the venues to be taken over by the private sector—because I don’t think the state can be a very good entrepreneur or venue manager.”

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