Tag Archive | "bankruptcy"


Critical Analysis: Is it Economically Responsible for a Country to Host the Olympic Games?

The cost of hosting the Olympics. Is it a mistake or an opportunity to profit?
Photograph: Peter Muhly/AFP/Getty Images

Once athletes and tourists pack their bags and head home, Olympic host cities must determine how to move forward.  Although the Olympics bring great opportunity to a city and country, host cities often struggle to profit from such a wildly popular event.  Significant losses result when cities cannot put Olympic stadiums to use, new infrastructures negatively impacts other areas (i.e. traffic), and the boom of tourism drops. Oftentimes, host cities aim to avoid substantial loss and hope to simply break even.

Athens, Greece spent $15 billion hosting the 2004 Summer Olympic Games.  Athens reveled in its recognition as the smallest country in history to host the Olympic Games.  However, following the 2004 Games, Greece was the first European Union country to be placed under financial monitoring by the European Commission in 2005.  Furthermore, the Games are said to have contributed to Greece’s declaration of bankruptcy.   The state contributed a large portion of the funding to host the Olympics and spent a significant amount on permanent structures.  However, since 2004 the structures have fallen into disrepair and the new transportation infrastructure has created flooding and traffic problems.  Unfortunately, in the years following the Olympics, Greece realized it has failed to use the Games as a stepping stone into the future.

Beijing continues to experience the effects of hosting the 2008 Olympic Games.  Of the $42 billion dollars China spent on hosting the 2008 Games, $3 billion was dedicated to permanent stadiums.  Most venues have since been abandoned.  The city continues to lose money because it cannot secure long-term tenants in its Olympic stadiums.  In addition, the stadiums still in use suffer significant loses each year, even with the financial assistance from the public.

Although London intended to scale back its expenses for the 2012 Olympics by building dynamic and temporary structures, it still cost about $16 billion to host the Games, some of which included public funds.  Now, London must move quickly to avoid becoming the next Athens or Beijing.  Although efforts are moving rapidly thanks to large government and private contributions, London can only hope its regeneration efforts for the East End succeed, and sooner rather than later.

It remains to be seen how the much-anticipated 2016 Olympic Games in Rio de Janeiro, Brazil will impact the city and country.  Already protests have begun in Brazil in response to hosting not only the 2016 Olympics but also the 2014 World Cup.  At first, protests occurred in response to a fare hike on the public bus system, but now protests are in response to accusations of misappropriation of funds and a corrupt system.  If the government continues to sink money into fancy new structures but fails to use the opportunity to improve the city’s infrastructure, protests will continue.  Without the necessary infrastructure and a plan for the years following the sporting events, the long-term benefits to the Brazilian people will be lost and Brazil will be added to the growing list of countries incurring huge losses in the wake of world-renowned but short lived Olympic Games.

One can hope the future hosts of the Olympic Games will learn from the mistakes of previous host countries.  Cities need to focus not just on celebrating the event but also how to yield long-term profits from the opportunity.  The Olympics provide the chance for a country to build essential infrastructure, boost its economy, and gain global recognition.  More importantly, the Olympics have the potential to propel a country into the future.

Lindsey Weber is a 2L and the Projects Editor on the Denver Journal of International Law and Policy.

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Customers stand in line to withdraw cash from an automated teller machine (ATM) outside a Cyprus Popular Bank Pcl. (PBS)

An Indecent Proposal: Cyprus Setting A Dangerous Precedent

Customers stand in line to withdraw cash from an automated teller machine (ATM) outside a Cyprus Popular Bank Pcl. (PBS)

Customers stand in line to withdraw cash from an automated teller machine (ATM) outside a Cyprus Popular Bank Pcl. (PBS)

When stuck between a rock and a hard place, what is the right course? The tiny island of Cyprus is forced to choose the best of only bad options. After years of over zealous banking leading to an oversized financial sector, Cyprus’ economy has finally snapped. Continuing the trend of failing European Union countries, Cyprus seems to be the next casualty after Greece. To avoid a possible countrywide bankruptcy, President Nicos Anastasiades agreed to extreme austerity measures to forestall an economic meltdown.

Cyprus has agreed to close down Cyprus Popular, the country’s second largest bank, and freeze all accounts over 100,000 euros to pay off part of the country’s ever-increasing debt. President Anastasiades described the agreement as “the best that we could achieve.” For now, all banks in Cyprus remain closed until further notice and ATM withdrawals are limited to only 100€ a day, despite the President’s adamant affirmations that it is only a “very temporary measure that will gradually be relaxed.” It is estimated that withholding people’s personal funds will raise 4.2 billion euros of the 5.8 billion euros necessary for the bailout, but losses for uninsured depositors are expected to reach as high as thirty percent.

Despite the Russian government’s outward endorsement of the plan, the Russian people are calling it “unjust, unprofessional, and dangerous.” In recent years, Cyprus has functioned as a popular offshore account for Russians. Russia showed its appreciation to the Cypriot government for being a holding place for its money by loaning it 2.5 billion euros in 2011 during a previous financial crisis. Now, Russians are starting to feel the heat about where they park their money, and they want out. In the midst of panic, Russia is demanding personal financial information about Russian depositors in Cyprus in exchange for more Russian financial support. However, Cyprus was unable to accept this condition and instead opted for a 9.9% tax on accounts over 100,000 euros instead of on all accounts. Such a levy has a “certain logic; Russians were the greatest beneficiary of the Cypriot banking system, therefore, they should be the ones who pay for the bulk of the bailout through the new tax.” Even though Cyprus has been receiving financial support from Russia, it appears that it will pursue a European solution without deferring to Russia.

The re-opening of Cyprus’s banks on March 28th is only a small first step back back toward normalcy. Residents will still only be able to withdraw 300 euros from ATMs – an increase of 200 euros from the previous 100 euro limit. Other limits on credit and debit charges will remain in place and banks will not cash checks. As one banking official reports, “There is no way these will only last seven days. These are permanent controls until the economy recovers.” Decisions have already been made to fire the chief executive and the rest of the board of Cyprus’s largest bank, the Bank of Cyprus, which expects losses averaging around forty percent. In the midst of this financial chaos, demonstrations ensue, as many workers realize their jobs are lost and wages cannot possibly be paid.

Cyprus is in a difficult position with seemingly no high ground. If it continues down its current path, Cyprus is setting a dangerous precedent for governments that believe withholding people’s own money is a viable option. The government is there to take care of its people; the people are not there to bail out the government. The government also needs to remember who it is protecting. The Cypriot government is there for the Cypriots, not the Russians. Resorting to blackmail and voluntarily handing out the private financial information of its depositors should never be a realistic option. So far, the Cypriot government has stood firm on this belief, but who knows how long the island nation can hold out against the all-mighty Angela Merkel or Vladimir Putin.

Mara Essick is a 2L and a Staff Editor on the Denver Journal of International Law and Policy

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University of Denver Sturm College of Law