Lowering the flame

The Summer Games in Beijing wrapped up two months ago, but Britain is still drunk on the heady wine of victory. Thousands of people lined the streets here this week for a boisterous parade honoring the nation’s Olympians, whose surprising haul of gold medals provided extra reason -- if one were needed in this pub-strewn country -- to party.

The hangover might lie around the corner.

London is set to host the Olympics in 2012, but the global financial crisis has left organizers looking for ways to scrimp amid a worldwide credit crunch, tumbling domestic property values and rising unemployment.

Already, the size of the athletes’ village has had to be pared down. Plans to erect temporary sporting venues might be scrapped. And the government could be forced to hollow out its contingency fund of $3.9 billion, out of a total Olympic budget of $16.5 billion, if some of the private financing fails to come through.

“When the budget was agreed [to] two to three years ago, we certainly did not expect a financial meltdown in the world,” said Keith Mills, deputy chairman of London 2012.

Olympic projects that were to be funded by a combination of public and private funds “are all constantly being reviewed,” he said, adding, “We’re in a very volatile market.”

Two of the biggest projects, the Olympic village and a mammoth $700-million media center, are now under scrutiny because of potential funding difficulties. Officials have had to cut the number of housing units in the village from about 4,000 to about 3,000, meaning that each apartment will have to hold five athletes instead of four.

Londoners never expected their Games to match Beijing’s extravaganza, which cost more than $40 billion. But neither did anyone expect grim reminders of the last time their city was the Olympic host, in the summer of 1948, when Britain was still staggering from wartime losses and the bombed-out capital was in such ration-coupon straits that the Games were dubbed the “Austerity Olympics.”

Now the sudden crash of Britain’s economy has chastened investors and officials and left them humbler about what to expect from their Summer Games.

Londoners who were used to cash and credit flowing as freely as champagne in recent years have had to rediscover a more traditional British value: thrift.

“The credit crunch is hitting the Olympics hard, but we remain resilient,” John Armitt, chairman of the Olympic Delivery Authority, told London’s legislative assembly this month.

“We cannot and do not expect to compete with Beijing in terms of scale, and I don’t believe we should try. London will be different, and we should celebrate that difference.”

Organizers say construction of Olympic Park in London’s East End, which they hope will help revitalize one of the city’s most economically depressed areas, is three months ahead of schedule. During a recent tour of the site, hard-hatted workers were busy moving tons of earth, ferrying around supplies and unhooking power lines from electricity pylons destined for removal.

At its peak, construction of the park will require a labor force of 9,000, planners say.

The $1.8-billion Olympic village was to be financed privately as part of a possible deal in which its Australian developer would be able to sell off the apartments after the Games. Such an arrangement was extremely appealing when London’s real estate boom seemed destined to last forever, but it’s less so in a time of tighter credit and tanking home prices.

Instead, the government has had to sink an initial $170 million from its contingency fund into the village while it tries to hammer out a deal by year’s end with Sydney-based Lend Lease.

“At worst, we continue building on a fee basis,” said Mark Gell, a spokesman for the development company. “The work’s getting done. The bills are getting paid. The difference is that we were looking at the potential of doing a debt-equity bill, and we’re negotiating the parameters on that.”

The difference for British taxpayers is that they could end up paying the entire tab if a deal isn’t worked out.

“That could be an extreme situation,” Armitt told the London assembly. “It’s not one which we are working toward, and it’s not one which anyone would want to see. We will do our level best to avoid that situation arising.”

Organizers of other coming Olympics are also looking warily at the global credit crunch. The organizing committee of the 2010 Vancouver Winter Games reported a deficit last week, though it said it had no indication of financial turmoil affecting advance ticket sales. And the Russian government, which is relying on private investment to shoulder about half the $12-billion cost of the 2014 Sochi Winter Games, said it would step in if private financing were to dry up.

For the London Games, organizers have already moved fencing events to a shared venue and are rethinking plans for temporary sites for other sports. The British Broadcasting Corp. said this week that a planned venue for badminton and rhythmic gymnastics could also be on the chopping block.

Still, putting on the Olympics should create thousands of jobs -- surely a silver lining, said Mills of London 2012.

“Given where we are economically, I’m not so sure that the Olympic Games might not just be the sort of incentive this country needs to work its way out of the economic environment we’re in right now,” he said. “It might just be the sort of thing that will help us recover from what will surely be a rough ride over the next few years.”

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henry.chu@latimes.com