2024-07-28
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"A France of 'freedom, equality and romance' has also made up for the lack of economic confidence of the Paris Olympics to some extent."
Text/ Ba Jiuling (WeChat public account: Wu Xiaobo Channel)
What supports the dignity of an Olympic Games is a country's cultural and economic foundation.
At 1:30 am on July 27, Beijing time, the 2024 Paris Olympic Games officially opened on the Seine River. A huge fleet carrying 10,500 participating athletes paraded along the river from east to west, passing Notre Dame de Paris, the Louvre, the Eiffel Tower, and finally arrived at the main venue of the opening ceremony - Trocadero Square.
Athletes parade on boat during opening ceremony of Paris Olympics
The special design of the open parade meant that in addition to the more than 100,000 spectators who bought paying tickets, countless Parisians also crowded on both sides of the river in the rain to watch.
The dark clouds did not hide the brilliance of the culture. Symbolic elements such as the Queen of the Decapitation, the Little Prince, and Les Miserables appeared one after another, and a five-minute feminist chapter paid tribute to it. It is worth mentioning that the number of male and female athletes in this Olympics was equal... A "free, equal, and romantic" France also made up for the lack of economic confidence of the Paris Olympics.
Eiffel Tower light show at the opening ceremony of the Paris Olympics
Before this, the Paris Olympics may be the Olympics that received the most complaints.
Three days before the opening ceremony, media reporters went to theWrestlingWhen they visited the project site, they found that the venue was still under construction; due to the heat wave, the Olympics canceled the installation of air conditioners in the Olympic Village; before the competition started, the supply of eggs and meat in the Olympic Village restaurant could not meet the demand... Although the Olympic Committee called all this "environmental protection", the impression of the "tight" and "poor" Paris Olympics still left a mark in mass media.
Olympic Village Saint-Denis, Paris, France
Is it true that the Paris Olympics is short of money? Today, let's do the math.
If you look at the revenue, you will find that the revenue of the Paris Olympics is not low.
First, ticket revenue has reached a new high. So far, 8.8 million tickets have been sold for the Paris Olympics, and it is estimated that more than 10 million tickets will be sold before the closing ceremony, breaking the record of 8.3 million tickets sold at the 1996 Atlanta Olympics.Ticket revenue is expected to exceed 1.1 billion euros, higher than the approximately 1 billion euros generated by the London Olympics.
Second, with the support of more than 40 sponsors, the Paris Olympic Committee's sponsorship income is close to 1.8 billion euros, and the sponsorship fee of the LVMH Group alone has reached 150 million euros. The local sponsorship income is second only to the Tokyo Olympics.
Olympic medals created by LVMH
Image source: China News Service
Third, the official website shows that the amount of broadcasting rights allocated by the International Olympic Committee to the Paris Olympic Committee has reached 750 million euros. According to the International Olympic Committee's 49% commission on broadcasting rights income, the Paris Olympics' income from this part should be the highest among all summer Olympics.
But if you look at the accounts, you will know what it means to save money like pulling silk and spend money like a mountain.
The cost of venue construction for the Paris Olympics was significantly lower than in the past, because 95% of the competition venues were directly or renovated from existing buildings, but it still could not escape the fate of cost overruns.
In 2017, Paris Mayor Hidalgo revealed that the total budget for the Paris Olympics was about 6.6 billion euros. As usual, the cost was mainly used for infrastructure and operations. In 2018, the Paris Olympics adjusted the cost to 8.3 billion euros, 4.3 billion euros for the construction of Olympic venues, and 4 billion euros for the operating expenses of the Olympic Organizing Committee.
According to the latest report from Asterès, a French economic research and consulting agency, the total cost of the Paris Olympics may reach 11.8 billion euros., the cost is mainly divided into three parts.
The first is the infrastructure cost, which is about 4.4 billion euros and is used to build venues, the Olympic Village and other infrastructure.
The second is operating costs, which are approximately 4.4 billion euros, mainly human resource expenses.
The third is the additional expenditure of 3 billion euros. Much of this expenditure was unexpected, for example, the Seine River could not be used for water quality inspections.Marathon swimmingThe cost of building reservoirs to collect dirty water and related cleaning work to improve the water quality of the Seine River for the competition exceeded 1.4 billion euros.
French government's Seine River cleanup
According to this comparison and calculation, excluding uncontrollable additional expenses, infrastructure and operating costs have increased from the initial 6.6 billion euros to 8.8 billion euros today.
What caused infrastructure and operating costs to rise by about 33% in eight years? There are many reasons, but the most important one is inflation.
In 2022, France's inflation rate will rise rapidly from 1.6% in 2021 to 5.2%, and in 2023 the inflation rate will be 4.9%. A grain of sand from inflation will become a mountain when it falls on the Paris Olympics. Let's do the math:
1. Price increase of infrastructure materials
According to data released by the French Federation of Small Construction Companies and Crafts (Capeb), French building materials increased by 8.9% in the first quarter of 2023 compared with the same period last year, especially ceramics and concrete, which saw the most significant increases, up 14.4% and 21% respectively.
2. Rising energy prices for transportation
In 2022, the energy price increase reached 23.1%, which directly affected the closely related transportation cost price by 10.4%.
Therefore, that summer, in order to prevent some suppliers from charging excessively high prices due to inflation, the purchasing department of the Olympic Committee requested that relevant clauses on cost prices be added to the logistics contract.
The clause is designed to prevent suppliers from asking for too much, but it also means that the Olympic Committee will have to bear the increased logistics costs during the preparation process due to inflation, such as transportation costs during the construction of venues.
3. Food price increases
In 2022, food prices increased by 6.8%; in 2023, the peak food inflation rate reached 15.9%.
Among them, the cost of meat has increased most severely. For example, in 2022, the price of poultry in France increased by 14.6% year-on-year, and the prices of beef and veal increased by 10.2% within one year.
Therefore, you all more or less understand the "hard work" of the Paris Olympics in providing a large amount of vegetarian food.
4. Rising labor costs
In 2022, service prices will increase by 3%, which means that various human resource expenditures during the Paris Olympics, such as security, cleaning and other service costs, will increase.
Among them, one of the most obvious expenses was the strike in January this year by the Paris police and their threat to "absent" from the Olympics if the police's needs were not addressed. The French Ministry of the Interior had to promise to give each policeman and gendarme an Olympic subsidy of up to 1,900 euros, resulting in an increase in labor costs of at least 500 million euros.
Security measures stepped up in Paris
Looking through the account books of previous Olympic Games, overspending is the norm.
Statistics, from 1992BarcelonaBy 2020 Tokyo, the Olympics were in a state of overspending.
It can be said that if you want to host the Olympic Games, you must be prepared for overspending.
Most of the money used to make up for the overspending gap is covered by the government.
Due to the epidemic and other reasons, the cost of the 2020 Tokyo Olympics increased from the initial budget of US$7.5 billion to actual expenditure of US$13 billion. The Tokyo Metropolitan Government and the Japanese central government finally borne US$7.1 billion of it.
Covering Olympic spending overruns ultimately tests a government's financial situation.
If the financial situation is not good, then rigidly guaranteeing the Olympics will incur huge losses. For example, in 1976, the city of Montreal, Canada, went bankrupt due to overspending on the Olympics, and it took 30 years to pay off the debt.
So what about the French government?
In 2023, France's public fiscal expenditure was 1.6074 trillion euros, fiscal revenue was 1.4534 trillion euros, and the public fiscal deficit was 154 billion euros, accounting for 5.5% of GDP. In 2024, the fiscal deficit ratio was still as high as 5.3%, higher than the expected 5.1%.
In addition, France's public debt exceeded 3 trillion euros in 2023, accounting for 110.6% of France's GDP.
In order to reduce the deficit, French Minister of Economy and Finance Bruno Le Maire announced in July that he would cut fiscal spending by another 5 billion euros, following announcing a 10 billion euro cut at the beginning of the year.
As the government's purse is tight, its support for the Olympics can only be reduced.
On the budget announcement interface of the official website of the Paris Olympics, there is a real Paris Olympics - "a self-sufficient Olympics", and it is stated that "the budget almost entirely (96%) comes from private institutions". Combined with the news that the Paris Olympics is "too poor", it is quite thought-provoking.
Source: Paris Olympic Games official website
The economic problems of the Olympics are a microcosm of the economic situation in France:The Olympics suffers from inflation, and France also suffers from inflation; the Olympics has no money, and the French government has no money either.
In the past two years, in order to cope with inflation, France, like many countries in the world, has chosen the panacea of "raising interest rates". For example, the interest rate of Type A savings account, the most widely held savings account by the French, has risen from 0.5% in 2022 to the current 3%.
Raising interest rates means that the central bank increases the interest rates on deposits and loans, causing borrowing costs to rise and deposit interest to increase, thereby causing businesses and individuals to reduce loans or increase deposits, reducing the amount of money in circulation in economic activities, balancing money supply and actual money demand, and thus curbing inflation.
As a classic operation in monetary economics, the interest rate hike did ease inflation in France - the Bank of France predicts that the inflation rate will be about 2.5% in 2024. However, it did not make the French government's fiscal situation better (at least it could only slow down the overspending problem of the Olympics, but could not improve the French fiscal capacity). On the contrary, it suppressed the amount of money in economic activities, which to some extent affected economic activity.
The reason is simple. When money is saved, there is naturally less money left for consumption and investment.
In 2022, France's GDP grew by 2.6%; in 2023, it only grew by 0.9%.
Earlier this year, the French Court of Auditors warned about France's fiscal situation, pointing out that if France's annual economic growth rate fails to reach 1.35% in the next few years, the deficit ratio will not be able to be controlled below 3% in 2027. By then, France's deficit ratio and public debt as a percentage of GDP may be as high as 5.9% and 120% respectively.
In the first quarter of this year, the French central bank expected economic growth to be only 0.8%.
The slow economic growth coupled with the ever-increasing size of public debt makes it even more difficult for France's fiscal situation to improve.
From macro to micro, the number of bankruptcies of French companies has increased significantly.
According to a report by French business consulting firm Altares, the number of corporate bankruptcies in France in 2022 increased by nearly 50% compared to 2021, with at least 42,500 bankruptcy procedures initiated.
In 2023, this figure continued to rise. Data from the French central bank showed that in the first eight months of 2023, the number of bankrupt companies in France exceeded 50,000, a year-on-year increase of 41.5%.
At the same time, France's unemployment rate has risen. In the fourth quarter of 2022, the unemployment rate for young people aged 15 to 24 in France reached 16.9%, and the number of long-term unemployed people was 580,000.
France's unemployment rate was 7.5% in the first quarter of 2024, which is still far from the French government's goal of keeping the unemployment rate below 5% by 2027.
Source: French National Institute of Statistics (INSEE)
In addition to the downward pressure on the economy, France has also been facing an extremely unstable political situation this year during its intensive preparations for the Olympic Games.
In a sense, the Paris Olympics opened successfully, but the difficult competition for France has just begun.
In the just-concluded French National Assembly election, the formation of a new government was difficult because none of the left, center, or right parties reached the absolute majority threshold of 289 seats. It is no surprise that the synchronization of the ruling party represented by Macron will be hindered.
In order to form a new government, the current French Prime Minister Attal, who is also a member of the Renaissance Party like Macron, also submitted his resignation to Macron. The newly elected French Prime Minister is unlikely to come from Macron's ruling party, thus resulting in a phenomenon of "co-governance by the left and the right".
Attal submits resignation to Macron
The last time France had "left-right co-governance" was in 1997, when right-wing President Chirac was forced to govern the country together with left-wing Prime Minister Jospin. During the five years of working together, conflicts between the two sides occurred frequently.
In some international summits, the two appeared in pairs and had to share a seat, which damaged France's international image.
This conflict has caused France's policies to be vacillating and difficult to advance on many political and economic issues.
During this period, the French economy declined. In 2001, France's GDP was about 0.07 trillion US dollars less than in 1997, and its share of the global GDP dropped from about 4.57% in 1997 to about 4.09%.
Today, the French National Assembly is divided into three camps: left, center and right. The three parties are in a stalemate and it is difficult to predict which camp the prime minister will eventually join.
Once a situation of "co-governance by the left and the right" is finally formed, based on historical experience, this is not the beginning of a good story.
Faced with political and economic difficulties, the lifelong romantic French may not pay much attention to the Olympic Games. They are more anxious about the fate and future of individuals and the country.
Author | Tian Weifeng | ResponsibilityEditor | He Mengfei
Editor-in-Chief | He Mengfei | Image source |VCG
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