No more cathedrals in the (Italian) desert

Amid the latest (irrelevant) round of downgrades by Moodys (see my previous post) and the excitement (or lack thereof) for the Republican primary season, a little piece of news seems to have gone unnoticed in the U.S. media, yet it is worthy of attention: Italy’s technocratic prime minister, Prof. Mario Monti, today decided that Italy (and Rome) will NOT put forward a candidacy to host the summer Olympic games in 2020.

This decision is good news, news that the vast majority of Italians wholeheartedly approve, news that signals a considerable shift in the mindset of the Italian public administration toward public money and the public good.

Some background may help. Over the last year, local and national politicians, as well as sports bureaucrats, vociferously proposed Rome’s candidacy to the 2020 Summer Olympics, undeterred by the negative business and financial climate and the woes of the Italian government. Interestingly, because of a series of circumstances (including a less than exciting field of competitors), Rome’s candidacy appeared to have a good shot at succeeding.

This candidacy had the unsurprising support of (nearly) all of the Italian political parties, from left to right. What marvellous opportunity for political patronage, they must have thought! After setting up a Rome 2020 committee (at the cost of $1.6 million a year for Rome’s City Hall) and collecting approvals from sports figures and corporate sponsors, the Olympics machine passed each obstacle toward the goal line. Last step, the necessary signature of the Italian government, for the CIO (the International Olympics Committee) requires national governments to provide written insurance that financial obligations will be fulfilled and cost overruns will be paid for were it to assign the event to the candidate city.

In the past, this approval would have been a sure thing. Italy has most recently hosted the FIFA World Cup in 1990 (a financial and logistical failure), the 2006 Winter Olympics (a great event but a financial failure nevertheless), and the 2009 Swimming World Championships (on which the italian courts are still laboring). Yet, once again the Monti government displayed the pragmatism and enlightening transparency that has earned it the praise of most. The government cabinet examined the finances of the most recent Olympic events around the world. What did it discover? All of them ended up costing way more than promised, making it nearly certain that the government would have to step in later to the rescue. For instance, this summer’s Olympic games in London overran their initial budget by nearly 100%; the Olympics in Athens in 2004 are likely to have accelerated Greece’s dramatic path toward insolvency; and the list goes on and on. As importantly, it found that most of the facilities built for these events end up accumulating dust and rust while being un-(or under-)utilized, at further cost for the taxpayers.

Thus, Monti said NO, an unequivocal NO, a mature NO, lucidly explained to the approving citizenry of Italy. Basically Monti said that he refused to burden Italy’s future generations (including its future politicians) with this massive expense. How refreshingly mature! If ratings agencies were doing their job, rather than recycling old information in their ratings, they would have waited for this decision before pronouncing their latest verdicts.

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About ppasquar

Associate Professor of Finance at the Ross School of Business, and long-term Napoli fan.
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