Aug. 12 (Bloomberg) -- The opening ceremony will be spectacular. Some of the sporting contests will be thrilling. And sentimentalists the world over will feel a lump in their throats as the Olympic torch is lit in Athens.

Yet, the games are turning into a financial disaster. Greece has raised its estimate of government spending on the event three times, and it now stands at as much as 7 billion euros ($8.6 billion), according to Deputy Finance Minister Petros Doukas. That's 52 percent more than the initial cost estimates.

And for what? A few weeks of ceremony that will be swiftly forgotten? A raised profile for what is already one of the most famous cities in the world? A boost for an already growing economy?

Those are meager returns for such huge expenditure. In reality, the Olympic Games have become a bloated economic monster, growing uncontrollably.

The first casualty of Olympic fever appears to be economic sense, a point that should be noted by the residents of Paris, London, New York and the other cities competing to bring this madness to their own doorsteps in 2012.

In the century since the modern games started, the event has grown as each decade passed, becoming a bigger media, sporting and political circus. And, of course, more expensive.

Montreal's Debt

The games reached their financial nadir with the Montreal Olympics in 1976. That event left a $1.2 billion deficit, which is still being paid off with the help of a supplementary tobacco tax, according to a recent study by accounting firm PricewaterhouseCoopers LLP.

Things improved in 1984 when the games in Los Angeles turned a profit of $355 million, the report said.

Seoul had an operating profit in 1988, but the next three Olympic cities -- Barcelona, Atlanta and Sydney -- only just managed to break even, according to PwC, citing figures based on prices in 1995 to allow comparison.

``There is huge uncertainty about any of the benefits,'' said John Hawksworth, head of PwC's macroeconomics unit in a telephone interview from London. ``Take tourism, for example. Some people will go to Athens for the games, but some will be put off. You have to be skeptical, because of course many of the figures are published by people promoting the games.''

Indeed. Economic nonsense comes in portions as large as a shot-putter's breakfast when it comes to the Olympics.

Deficit Limit

Take Athens.

As of yesterday, the event's organizers had sold about 2.6 million tickets of the 5.3 million that were available, hardly a great indication of financial success.

The cost of the games will increase Greece's budget deficit to more than 4 percent of gross domestic product this year, according to Doukas. That means Greece will breach the 3 percent limit required for euro membership, which the country struggled to meet in the first place.

What's the justification?

It will stimulate the economy, the games' supporters argue.

Well, you don't need to be John Maynard Keynes to know that if the government spends massively on infrastructure, that boosts the economy. Indeed, the Greek economy grew 4.3 percent last year -- one of the fastest rates in Europe.

Against that, the higher taxes needed to pay back all that debt are going to depress the economy. And couldn't the money be better spent on something other than some glittering stadiums that will be empty in a few weeks' time?

The Profile Argument

Then there are those who say the games will raise the city's profile.

Really? Is there anyone out there who hasn't heard of Athens? Or Greece? Or who doesn't already think they should see the Parthenon at least once before they die?

According to the World Tourism Organization, Greece had more than 14 million tourists in 2002, suggesting plenty of people already thought it was worth visiting. Seven billion euros seems like an expensive ad campaign for the Greek tourism industry.

The Olympics will lift the nation's spirits, others say.

True, up to a point. It's hard to spend that amount of money on a party without having a good time. Yet, won't the cost of it all just depress everyone later?

A simpler, more economic games is needed. One solution would be a permanent site (to which no city would have a better claim than Athens). Alternatively, the International Olympic Committee could impose strict limits on spending, telling cities that they must use existing stadiums, and capping expenditure at, say, $1 billion.

Inept Campaign

Beijing is already stuck with the 2008 games, and it's hardly encouraging that work has stopped on the $423 million main stadium amid safety and cost concerns.

The 2012 games are still up for grabs. London, Paris, New York, Madrid and Moscow should each run such inept campaigns that the prize is certain to go to another city. As a Londoner, I'm pleased to say, my own city is already following that advice.

To contact the writer of this column: Matthew Lynn in London at matthewlynn@bloomberg.net.

Last Updated: August 12, 2004 01:10 EDT