Causes and Effects
Studies in Fiscal Federalism and State-local Finance series
Edited by Ehtisham Ahmad, Massimo Bordignon and Giorgio Brosio
Chapter 10: A tale of two cities: the Olympics in Barcelona and Turin
This chapter analyzes the impact of the organization and considerable investment associated with the Olympic Games on the finances of two of its host cities, Barcelona and Turin. Two cities represent only a small portion of the aggregate revenues and expenditures of local governments in Italy and Spain respectively. Given that there are more than 8,000 municipalities in both Italy and in Spain, neither city can claim to be representative in either country. However, both cities have been submitted to the special level of stress associated with the Olympic Games. The Olympics pose a big challenge for the soundness of municipal finances, as they represent a highly costly and financially risky event. Although the host cities usually receive an assured level of financial support from higher levels of government, and from sponsors, which in principle should cover the entirety of the costs, they are in the end held responsible for the success of the event, something that can imply financing unexpected and unplanned expenditures. The host cities can also be tempted by the exceptionality of the event to proceed to develop projects associated with urban transformation, and hence to incur broader expenditures. In this perspective, the survival of the finances of the organizing cities can be taken as an indicator of the capacity of the local system to withstand economic/financial stresses. This can be gauged by their ability to avoid excessive deficits and bailouts.
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