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Global crisis has London thinking humbler Games

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Feb 4, 8816

By Henry Chu

LONDON — The Summer Games in Beijing wrapped up two months ago, but Britain is still drunk on the heady wine of victory. Thousands of people lined the streets here Thursday for a boisterous parade honoring the nation's Olympians, whose surprising haul of gold medals provided extra reason — if one were needed in this pub-strewn country — to party.

The hangover might lie around the corner.

London is set to host the Olympics in 2012, but the global financial crisis has left London organizers looking for ways to scrimp amid a worldwide credit crunch, tumbling domestic property values and rising unemployment.

Already, the size of the athletes' village has had to be pared down. Plans to erect temporary venues could be scrapped. And the government could be forced to hollow out its contingency fund of $3.9 billion, out of a total Olympics budget of $16.5 billion, if some private financing fails to come through.

"When the budget was agreed two to three years ago, we certainly did not expect a financial meltdown in the world," acknowledged Keith Mills, deputy chairman of London 2012.

Olympic projects that were to be funded by a combination of public and private funds "are all constantly being reviewed," he said. He added: "We're in a very volatile market."

Funding difficulties

Two of the biggest projects, the Olympic village and a mammoth new $700 million media center, are under scrutiny because of potential funding difficulties.

Officials have had to cut the number of housing units in the village from about 4,000 to about 3,000, meaning that five athletes will have to squeeze into each apartment instead of the four originally envisioned.

Londoners never expected their games to match Beijing's extravaganza, which cost more than $40 billion.

But neither did anyone expect grim reminders of the last time their city played host, in 1948, when Britain still staggered from its wartime losses and the bombed-out capital was in such straitened, ration-coupon circumstances that the games were dubbed the "Austerity Olympics."

Now, the sudden, fiery crash of Britain's economy has chastened investors and officials and left them humbler about what to expect from their Summer Games.

Londoners used to cash and credit flowing as freely as Champagne in recent years have had to rediscover a more traditional British value: thrift.

"The credit crunch is hitting the Olympics hard, but we remain resilient," John Armitt, the chairman of the Olympic Delivery Authority, told London's legislative assembly earlier this month. "We cannot and do not expect to compete with Beijing in terms of scale, and I don't believe we should try. London will be different, and we should celebrate that difference."

Organizers insist that construction of the Olympic Park in London's East End, which they hope will help revitalize one of the city's most economically deprived areas, remains three months ahead of schedule.

At its peak, construction of the park will require a labor force of 9,000, planners say.

The $1.8 billion Olympic village was to be financed privately as part of a possible deal in which the Australian developer would get to sell off the apartments after the games.

Less appealing today
Such an arrangement was extremely appealing when London's real-estate boom seemed destined to go on forever but is less so now in a time of tightened credit and tanking house prices.

Instead, the government has had to sink an initial $170 million from its contingency fund into the village while it tries to hammer out a deal with the Sydney-based Lend Lease development company by year's end.

The difference for British taxpayers is that they could end up footing the entire bill if a deal is not worked out.
Source: Chron

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