Hungary's PM Wants the Olympic GamesEdith Balazs and James M. Gomez
Budapest up against Paris, Rome, L.A. to stage 2024 games
Organizers' $2.8-billion budget `fanciful,' economist says
On the low-slung cement walls of Olympic Park in Budapest, the Hungarian capital itself is notable for its absence among the decorations listing past hosts of the Summer Games.
It’s now Budapest’s turn to run the world’s biggest sporting event, reckons Marianna Lugos, a 67-year-old who was watching children romp across a jungle gym in the park. She supports Prime Minister Viktor Orban’s effort to clinch the games for 2024. Though considered a dark-horse bidder against Paris, Rome and Los Angeles, the government is confident the city of 1.7 million people has a good chance when the International Olympic Committee decides the winner in Peru next year.
“I really like the idea,” Lugos said. Behind her loomed the Olympic rings, eight meters (25 feet) above the banks of the Danube River, painted in Hungary’s red-white-green tricolor. “I think a lot of people would come to visit and they’d get to know the country. It would be very good.”
Orban is sharpening his pitch to invest $2.8 billion to bring the games to post-communist central Europe for the first time, modernize infrastructure and build sports facilities at a cost that won’t bankrupt the city, eight years after the country needed a bailout. He is betting that holding down construction costs and luring hundreds of thousands of visitors to Budapest will help pay for the event, while the cachet of hosting the games will resonate for years to come through increased tourism.
Still, the Olympics can be financially challenging for even the biggest of metropolises and Hungary’s public finances already support outsized sporting and infrastructure projects dreamed up by Orban. Additional costs associated with the games may have to be borne by taxpayers, as was the case in London and other venues, economists said. The premier’s goal of building an "illiberal" regime has also attracted concerns about corruption, which carry further unidentifiable and uncontrollable costs, economists warn.
"Most of the claimed benefits of hosting are illusory,” said Andrew Zimbalist, an economics professor at Smith College, in Northampton, Massachusetts and the author of Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup. “This creates a very substantial short-run deficit that would have to be made up by long-term gains, such as increased tourism, foreign trade or investment. But research shows that these hoped-for benefits do not materialize.”
Orban has rejected any suggestion that the games would be wasteful. Pal Schmitt, Hungary’s former president allied to Orban, and himself an Olympic champion in fencing, said that the candidacy had merit as it would bring the games to this part of central Europe for the first time, according to an interview with public television in February. Zsolt Borkai, the head of the Hungarian Olympic Committee, said he’s confident the country has a viable shot because of 2014 changes to the selection process that may favor smaller cities.
Changes in the IOC’s agenda that allow for toned-down, less-costly affairs may make it easier for Budapest to run the games without a loss, said Peter Oszko, who served as finance minister from 2009 to 2010.
“It’s true in a theoretical way, under laboratory conditions, with the basic tenet that the entire process remains free of corruption,” Oszko said in a phone interview. But “given Hungary’s current political and economic situation, the risk of massive corruption simply can’t be disregarded.”
Orban’s cabinet has shown its penchant for sports by building 586 new facilities in the past five years. The cost of hosting next year’s World Aquatics Championship currently stands at about $280 million, triple the original estimate, news website hvg.hu calculated, based on 2017 budget items. The government has not yet published the final cost. The cabinet also plans to invest 215 billion forint ($791 million) in 32 soccer stadiums through 2020, separately from the Olympics project, according to news website Atlatszo. The Economy Ministry didn’t reply to Bloomberg questions on the exact cost of stadium investment.
The construction and refurbishment of soccer stadiums across the country, including a state-of-the-art 3,500-seat facility in Orban’s village of Felcsut, has fueled public discontent at a time when teachers and health-care workers are clamoring for more spending.
Budapest sees the net cost of hosting the Summer Games at 774 billion forint, with spending on the bidding process alone amounting to 10 billion forint, according to a feasibility study compiled by PricewaterhouseCoopers. That is less than half of Paris’s $7 billion preliminary budget, the $8.5 billion final cost of the Athens 2004 Summer Games and is dwarfed by the 9.3 billion-pound ($13.7 billion) tab for the 2012 London Olympics.
Though acknowledging "Budapest is competing against stronger adversaries," Hungarian Olympic Committee head Borkai said the IOC’s new focus, outlined in its Agenda 2020, to create sustainable infrastructure and move away from "gigantic" Olympics “opens the way for Budapest to enter the race with the same chances as the other cities.”
Even so, Hungary’s budget estimate is "fanciful," according to Smith College’s Zimbalist. The cost runs from about $10 billion to $30 billion, whereas the net revenue from the Summer Games is around $4.5 billion, he said. Hungary’s entire annual gross domestic product is about $140 billion.
In addition, there is a real threat that fraud and waste would permeate the Olympic project, as Hungary has shown an erosion of rule of law and growing institutional corruption, said Istvan Janos Toth, the director of the Corruption Research Center Budapest, an independent research institute partly funded by the European Union.
Hungary slid three places last year to rank 50th on Transparency International’s corruption perceptions index, 27 places below France, though still outperforming Italy, another would-be host.
The planned $14 billion extension of Hungary’s Paks nuclear power plant, to be financed and built with Russian help, is adding to concerns after a string of projects awarded to companies controlled by the family members and friends of the regime’s luminaries.
"With crony capitalism flourishing in Hungary, projects like the Paks nuclear plant expansion or the Olympic bid carry a very high risk of corruption and of distorting market economy and will eventually end up being very costly for Hungarian citizens," Toth said.
While Orban claimed in December that the Olympic initiative is popular, support for hosting the event slid to 41 percent last September, according to polling company Median, compared with 60 percent measured by Ipsos in February 2015. Over 60 percent thought the city would be unable to utilize sports infrastructure built for the games while 72 percent believed that the funds should be used to finance health care or education.
Word on the street echoes the Median findings. Lajos Karasz, 38, who took his wife and daughter for a day out to the Olympic Park, said the money would be put to better use elsewhere.
"If it were up to me, I’d spend this money on health care," Karasz said. "Hosting the Olympics is nice but there are many ways to better spend this money: it could go for instance to the many underdeveloped regions in the country with no jobs."