Greek officials appear to be gearing down as much as gearing up for the 2004 Olympics, as they attempt to dampen expectations for what should have been a historic celebration with the games returning to their birthplace.

The capitol's 3 million-odd inhabitants appear to have gone from euphoria to near-despair as they watch the preparations for the Olympics unfold. "I have stopped thinking about it because every time I do, I fall into depression," said one top travel agent, who for pride's sake asked not to be named. Another travel agent, Nicos Papadopoulos, was more optimistic: "I am Greek and I believe in miracles!"

Greece is the birthplace of the games and staged the first modern Olympics in 1896. But its two previous bids before the 2004 success were rejected for lack of infrastructure – and in the case of the 1996 loss, cynics say, lack of purchasing power compared with Atlanta.

Still, in recent years Greece has taken huge strides toward modernization. Remote villages and cities are now connected by a modern network of roads and a $3 billion highway construction project linking the east and west of the country is also underway.

The change is visible in each part of the country, with economic growth touching almost 4 percent, well above the EU average, and liberalization finally progressing, as dinosaur monopolies like Olympic Airways and telecom giant OTE are sold off. The government is pulling out of sectors like tourism, looking instead to the private sector for investment in, among other things, the building of the tourist infrastructure to cater for 2004 and beyond.

At the same time, the fact that Athens is an extremely small and congested city crammed with monuments – magnificent but also fragile – means that the preparations for the games represent an enormous challenge for Greece.

If the statistics reeled off by the Athens 2004 Olympic Committee are to be believed, the picture is all rosy. "We are 72 percent ready," claimed an Olympic official who declined to be named. Yet just last year, the International Olympic Committee criticized Athens' lack of preparation and threatened to take matters into its own hands – even hinting that the games could be transferred elsewhere if required. Some Greek emigres shook their heads: "We Greeks struggle to organize a wedding; how were we ever going to be able to host an Olympics?"

Nevertheless, signs of work and progress are everywhere. Greeks, by and large, see the games' homecoming as a chance to showcase their country to the world. The Athens metro project has been completed, and a modern international airport has also been finished.

But the official Athens 2004 report card prepared by the Greek Olympic Committee betrays the worries and concerns of the organizing committee. "[Memorandums of understanding] have been signed with 15 ministries and government agencies," says the progress report – conceding that the government and bureaucracy are the biggest hurdles facing Athens 2004.

For a city and country that has thrived for decades on tourism, one would expect Athens to be ready, at the very least, in terms of accommodation. But the country's legendary red-tape and bureaucracy have meant that while many regions in Greece have prospered from the tourist industry, Athens remains the worst prepared to cope with the avalanche of people the Olympic Games draw.

"The Olympic family needs some 20,000-25,000 rooms and we shall have them ready," another games official said, again on condition of anonymity. But his fuzzy math broke down when pressed for details. "We'll have the rooms ready for athletes and officials at the Olympic village," he added. But the village still only appears to be at the drawing-board stage. Meanwhile, some 90 percent of existing quality rooms in all Athens hotels, including those on the outskirts of town, have already been secured by the 20,000-odd journalists and other "Olympic family" members that follow the games everywhere.

That leaves almost no rooms for any visitors in Athens. Even if all Athens' notoriously ill managed, poorly provided and over-priced hotels – which could barely claim two- or three-star status – are to be upgraded by 2002, as claimed, that would still leave some 200,000 potential visitors without a roof over their heads.

In a bid to look for some solutions, the ministry of development has opened up previously restricted areas for new hotel constructions, and claims to have received some 70 applications for new developments.

To be fair, there is little the Athens 2004 organizing committee can do in this matter. For once, it is the hoteliers that must take measures to avoid the impending disaster. A source in the hotel industry says that "almost no hotelier is willing to invest huge amounts on the promise of Athens 2004, fearing that development will lead to ferocious competition, and losses, once the games finish."

Although games officials repeatedly stress that they are independent of government plans and work, the process is complex and closely intertwined. The total budget for the games is $1.7 billion, with any shortfalls expected to be made up through sponsorship, media income, ticket sales, product sales and so forth.

"Our sponsorship targets are also well on the mark," an official said. The government has also promised to step in if there is any shortfall for games organization, though Athens 2004 officials remain confident of raising the money from domestic corporations.

Many members of the Greek cabinet are gung-ho about the opportunities the 2004 games present. They see it is a unique opportunity to do things for this historic city that otherwise could never have been done. The ambitious plans drawn up by the authorities include the development of a green belt linking all major historical and archaeological sites in the city center with pedestrian paths. Athens will be given a new, modern and greener look.

"If they build hotels and tourist facilities, it will make Athens one of the most important cities in Europe," says Markos Shiapanis, a travel-industry maverick who has visited every Olympic host city in the past 25 years. "It will increase the number of visitors and tourists and make the city a better destination for business.

"Look at what happened in Spain, Atlanta and in Sydney. The development for the games is the best excuse for development; it pays unbelievable long-term dividends for the city. I think people underestimate us. We are our own worst critics but you will see that Athens will be ready."

But hoteliers do not seem to be buying into the hype, not for the moment at least. Some minor expansion projects aside, no major hotel project can be seen on the horizon.

"We have plans to bring in cruise ships on Pireaus harbor to accommodate thousands of visitors," said one games official.

Heaven forbid! Pireaus, some 10 minutes to an hour's drive from the city (depending on traffic) already gives the impression of a port that could sink in the Mediterranean if one more tourist set foot on it. The port is a chaotic little place overwhelmed by traffic.

The old city could not handle tens of thousands of visitors clamoring each day to get to the games. The port has no parking facilities and exits from the city toward Athens are clogged even in the middle of the day.

Few doubt, however, that major sites will be ready and Athens will host one of the most memorable games in history. "It will be different," says one Olympic official, "with Greece stamped all over it."