MICHANIKI SA, Greece's fifth-largest builder, boosted wages by as much as 30 percent to lure enough workers to finish an eight-storey press centre a month before the opening ceremony of the Athens Olympics on August 13, 2004.
The 2004 Games will create as many as 70,000 local jobs and attract 500,000 visitors, organisers estimate. Sponsors including Coca-Cola Co, the world's leading soft-drink producer, will hire hundreds of people to promote their brands to an estimated 4 billion television viewers around the world.
"It's quite an effort to find good employees now," Michaniki chief executive Melina Emfietzoglou said. "The cost is high because we are in a time of need." Greece is spending about $8 billion to host the 25th Summer Olympics, fuelling exceptional local growth. The economy will expand 3.6 percent this year, the EU estimates, more than five times the rate predicted for the 12 nations sharing the euro. Unemployment has fallen to 9.9 percent, the lowest rate since at least 1998 when the current series of records began.
The pickup won't last unless steps are taken to reduce state interference in business and combat rigid labour laws that have kept Greece from catching up with its European partners, Emfietzoglou and others maintained. The 41-year-old executive said she won't be able to keep all of her employees.
"For things to change, there need to be major efforts to cut bureaucracy, make taxes more competitive and allow the labour market to make faster adjustments, '' said Tryphon Kollintzas, a professor at the Athens University of Economics and Business. "Are we grasping the opportunities? I'm afraid not. ''
One hindrance to investment is the state's reluctance to reduce control over the nation's economy, Kollintzas said. The government still controls all of Greece's utilities including Public Power Corporation; the biggest oil refiner; Olympic Airways, the dominant airline; and six banks including the country's largest, the National Bank of Greece.
It also restricts entry into dozens of professions. Hair stylists, for example, are required to apprentice for seven years before they can open their own businesses. Government infighting even set back Olympic preparations. Disputes between different ministries and committees over who would oversee the Games' organisation delayed construction for years, leading the International Olympic Committee in 2000 to warn the event was "in danger".
Down to the wire
Greek officials have said they will probably work on the 75,000-seat Olympic Stadium until the end of June, two months before the games start. They will run from August 13 to 29 of next year. Labour laws in the country of 11 million people limit the use of part-time employees and make it difficult to fire workers, especially en masse. The laws are the third-most restrictive after Portugal's and Turkey's, according to a study of 26 countries by the Organisation for Economic Cooperation and Development four years ago.
The country attracted 53 million euros ($60 million) of foreign direct investment in 2002. Hungary, with an economy half the size of Greece's, attracted more than 20 times that amount. Output per capita last year in Greece was 66 percent of the EU average, the lowest in the 15-member bloc and little changed from what it was three decades ago.
'No reason to invest'
Greece ranked as the EU's least competitive nation for a fifth straight year in the World Economic Forum's 2002 index, which takes into account dozens of variables such as government favouritism and employee training. It's less competitive than six of the eight former communist countries that will join the EU next year, including Hungary.
"There is no reason to invest here," said Haris Stavrinoudakis, chief financial officer of MJ Maillis SA, Europe's No 2 maker of packaging straps. The Athens-based company raised 36 million euros selling bonds last year to take advantage of falling interest rates. Then it cut jobs in Greece and invested the money in Italy and Canada. "We need to be closer to our markets and Greece isn't cost-efficient," he said.
In January, Canada's TVX Gold Inc fired about 500 people and closed its lead and zinc mine in northern Greece because of an eight-year dispute with government officials and courts that prevented it from acquiring mining permits. The company had invested more than $250 million in the country.
Signs of change
There are some signs of change. Greece has opened up some markets - such as banking and telephone services - after joining the European Union in 1981. It benefited from EU aid that totalled 5.5 billion euros last year.
Following the country's entry into the eurozone in 2001, borrowing costs fell to their lowest on record as investors sought to benefit from returns that were higher than in Germany or France. The yield on Greek 10-year bonds was 6.7 percent at the end of 1999, 1.3 percentage points above equivalent German bonds at the time. The spread is now 0.14 percentage point.
Greece in recent years has also avoided the labour unrest that hurt its economy in the past. New Democracy, a pro-business party, lost power to the socialist Pasok party in 1993 after strikes crippled the nation for a year as it tried to raise the retirement age and sell state businesses.
"The current pace is the right pace," said Stratos Papadimitriou, the head of Greece's foreign investment agency and former chief executive of the Athens bus company. "You can't operate separately from the society that you live in and maybe you would lose more if reforms went too quickly."
The Olympics, meanwhile, have hastened government decision-making. For decades it had considered building an Athens subway and new city airport before the country won the right to host the Games in 1997. Now, Athens has both. Greece is the smallest nation to host the modern Games in half a century and the event will generate as much as 10 billion euros in economic output between 1998 and 2010, the equivalent of about 6.6 percent of gross domestic product, the state-funded Centre for Economic Planning and Research (KEPE) has estimated. That's more than three times the impact of the 2000 Sydney Games, according to estimates made by Australia's New South Wales government.
With tourism the second-biggest industry after agriculture, the Games will allow the country to promote itself as a place to visit and do business in the region. The national economy last year generated 9.6 billion euros in revenue from tourists, according to Bank of Greece data.
And some Olympics-related investment will stick. Schlumberger Ltd's Sema unit, which is running computer systems for the Games, has opened a Greek arm that it hopes will win local contracts after the Olympics, said Aris Seitanides, the company's central operations manager in Athens.
"If you look at it in the long term, the impact on the development of Greece is definitely a plus, '' said Ioannis Spanoudakis, managing director of the Athens 2004 Organising Committee and a former Dow Chemical Co executive. He estimates the Games will create 50,000 permanent jobs. That may be overly optimistic based on the experience of past Olympic hosts.
Barcelona, like Athens, spent more than $9 billion to build roads and other infrastructure for its 1992 Games, helping to generate as much as $26 billion in benefits, according to a study published by Universitat Autonoma de Barcelona in 1995. That's still less than 6 percent of Spain's economic output in the Olympic year. Many of Barcelona's businesses didn't keep benefiting after the Games. Hotel revenue per available room fell by almost 60 percent in the two following years because of oversupply, while office vacancies jumped to 10.4 percent in 1992 from 0.7 percent three years earlier, according to a report by Jones Lang LaSalle Inc, a commercial real-estate broker.
Demand for Athens property will probably slow after the 2004 Olympics, said Panayiotis Nikolaou, development director at Lamda Development SA, Greece's second-biggest real-estate developer. Home prices in Athens have more than doubled since the country won the bidding to host the 2004 Games six years ago. "Everyone expects the market to taper off," Nikolaou said. Jobs will go, too. The Athens organising committee alone will have about 6,500 workers at the height of the Games, making it one of the country's largest employers.
Greece's budget deficit, meanwhile, will probably widen to a four-year record of 1.6 percent of economic output this year to fund the Games, Alpha Bank SA has estimated. The Olympic investments have driven the inflation rate up to 3.5 percent, more than three times the rate in Germany.
Even without the additional spending, the country's pension deficit threatens to bankrupt the nation within a generation. It may require annual outlays equal to 24 percent of economic output by 2040 to finance its pension system, the International Monetary Fund has estimated. The EU average will rise to about 13 percent over the same period.
Greece is the least creditworthy nation in the EU and is rated four ranks below a top AAA grade by both Moody's Investors Service and Standard & Poor's. "The Greek economic policy agenda must include the expansion of structural reforms in product, capital and labour markets in order to sustain the strong economic performance, '' said Nikos Kambas, chief executive of General Construction Co, another contractor working on Olympics projects.