UK's problems will be back as soon as the party is over

The Olympics are a fine way for Britons to forget their troubles, but the Games will end and the problems will remain.

This is a glorious time to be in London. Everyone seems to have a smile thanks to the Olympic Games, which have transformed this cynical, short-tempered city into happy town.

To national amazement, the British athletes are doing well in the medals ranking, standing in third place, after China and the US. Even more surprisingly, the creaking transport system has more or less coped with the influx of visitors. All are charmed by the 2012 volunteers in their plum and puce uniforms.

A parade of acid-penned British newspaper commentators has come forward to recant doom-laden predictions and declare that, far from being a catastrophic waste of money, the Games are an unalloyed success.

There is nothing wrong with London, it seems, that cannot be fixed by spending £9 billion (Dh52bn) on a two-week festival, plus whatever it has cost to incubate a new generation of world-beating athletes in Olympic sports (with the glaring exception of football).

Whatever purists may say about the "Corinthian" spirit of participation being more important than winning, the Olympics have always been more about national power than individual achievement.

In the modern era, the medal table has been topped mainly by the US and the Soviet Union, with the notable exceptions of Britain at the height of its imperial pomp in 1908 and Germany, the newly risen power, in 1936, and finally China in 2008. Home advantage aside, does this mean there is some roar left in the mangy old lion of imperialism?

Nations find it hard to keep two rival narratives in their heads at the same time. Were it not for the distraction of the Games, London's mood would be dominated by two grim anniversaries. As the financial experts have it, Britain is half way through its "lost decade" - beginning in August 2007 with what was then the credit crunch and has now become a global slowdown.

And only last year, the foundations of a this multicultural city were shaken when the police lost control of London to gangs of looters.

This week, 16 young men were sentenced for up to nine years for a rampage on August 8 last year in the Notting Hill area, where David Cameron, the prime minister, has his home. They even robbed diners in the Michelin-starred Ledbury restaurant.

The memory of that night has now been overlaid by scenes of polite young men and women of all races guiding visitors around the Olympic sites.

Instead of masked gang members, now we see role models in the form of Somali-born Mo Farah, the middle distance runner, and Jessica Ennis, the "face of the Games" and winner of the women's heptathlon, whose father is from Jamaica.

Role models are fine, but no one would claim that the problems of unemployment, lack of educational achievement and family breakdown in poorer areas of the capital have been solved. Indeed, the budget-cutting envisaged by the government to reduce debt is likely to reduce support for the most needy families.

Meanwhile, at the top of the pay scale, the reputation of London's banks, the motor of the capital's economy, is in tatters. Leading banks are accused of corruptly fixing interest rates in search of profit, while Standard Chartered Bank faces the prospect of losing its US banking licence for, as the New York state regulator alleges, breaches of US sanctions against Iran - a charge the bank robustly denies.

There is no gilding of Britain's economic prospects. There will be no growth this year, and with a worsening crisis in the eurozone countries, prospects for a rebound are receding.

Politically, things are not much better. The governing coalition of Conservatives and Liberal Democrats is close to coming apart, held together only by both parties' fear of facing the voters at a time of economic distress.

The Sun newspaper may have filled its front page with 22 gold medals and the cheeky headline United Blingdom, but the prospects for the real-world UK are not great. Scotland is preparing for a referendum on independence, which looks more likely if the government in London continues to weaken.

These days there are few countries in the developed world that do not face major problems, so Britain is hardly alone. And why should it not take a couple of weeks off from its troubles?

But for me, the happy bubble enveloping London reminds me of Moscow in 1980, when the Soviet Union hosted the Games to prove the superiority of the communist system. The Soviet army had just invaded Afghanistan. At the time, this seemed like a step towards taking over the oilfields of the Middle East and not, as it later emerged, a catastrophic case of imperial overreach.

In the Moscow bubble, no one wanted to focus on the news from Poland, where strikers were blocking the railway line to Russia at the start of a mass protest that would lead, within three weeks of the end of the Olympics, to the recognition of Lech Walesa's Solidarity trade union in Poland and the gradual collapse of the Soviet empire.

There were clear signs in 1980 of the economic sclerosis that would kill the USSR. Moscow's new airport terminal had been built by foreign firms, with foreign labour, using imported materials. The central-planning system could not cope.

It is foolish to draw direct comparisons with the past. While bidding for the Games, the British government presented London as a global capital of the future, a thriving city where people from every country could make their homes.

So far the smiles on the faces of Londoners have proved that the old city can indeed pull off a global party. But Team GB's success does not automatically translate into the revival of a fractured society.

A lot of hard work will be needed to make London really work. After the party, real life will again impose its own agenda.

On Twitter: @aphilps