The swimmers were bickering and unmotivated, finishing far slower than their personal bests. The track-and-field team watched medal after medal fall to small-country upstarts such as Ethiopia or Belarus. That was four years ago in Sydney, where the once mighty German sports machine fell to fifth place, barely leading a large pack of middling nations--after coming in an easy third in the two prior Games. The fact that Germany took almost as many total medals as

third-place China, yet only half as many gold, seemed a particularly acute sign of malaise. Were German athletes missing a "victory gene"? asked Bild, a mass circulation tabloid, at the end of the Games. The president of the German Olympic Committee diagnosed a case of bronze-medal syndrome, commenting that Germans "have no problem winning medals but a problem winning the gold."

Now Berlin is revamping the Olympic program in ways that mirror its attempts to attack the "German disease" of an underperforming economy. Free-market competition and incentives are challenging the bureaucratic inertia of this egalitarian society. Germany's unofficial Olympic motto--"Being there is everything"--has been jettisoned in favor of a new focus on winning. Funding for athletes is increasingly awarded on the basis of international results, with bonuses for winners. Even athletes who meet the tough performance standards the International Olympic Committee sets for participation in the Games aren't guaranteed a slot on the team if they don't have a chance for a medal. "The selection process has gotten supertough and will get tougher in the future," says Jorg Ziegler, Olympics coordinator at the German Sports Federation in Frankfurt.

Despite European Union pressure to rein in budget deficits, Germany has held federal subsidies for Olympic-level sports steady at a respectable $140 million a year. One of the first quick post-Sydney remedies was a new state-financed center at the University of Heidelberg to investigate performance anxiety and team dysfunction. The swimmers are now monitored by psychologists, as are most of the other teams. As a result, star swimmers like Antje Buschschulte and Franziska van Almsick have emerged from slumps and are back to medal-winning strength.

Germany's descent was largely inevitable. Following the fall of the Berlin wall, reunited Germany raked in medals in Barcelona and Atlanta. But its success was inflated by the momentum of the East, where the communists had employed coercion and drugs to surpass U.S. medal totals by 1988. As the East Germans melded into a nation wallowing in economic torpor, the Olympic program began to sink too. Complains Athens-bound Ingo Schultz, 29, European champion in the 400-meter run: "The desire to perform isn't very developed among Germany's young athletes."

Today the German Olympic program has no national sports authority, relying on an unusual variety of state sponsors at all levels. A third of this year's 453 athletes, including favorite star Eric Walther, belong to special army units that allow soldier athletes to train full time. The rest emerge from some 90,000 discipline-specific sports clubs, regional training centers and schools. This grass-roots network was great at producing large numbers of good amateur athletes, but has developed its own byzantine bureaucracy that can often stifle change. And now that Olympic training has become a full-time profession, says Ziegler, the system needs change.

Germany also continues to harness its engineering strengths to the medal chase. One of the few state institutions rescued from the communist era is the Sports Equipment Research Institute in Berlin, where scientists develop the boats, bikes and bobsleds that give Germans an edge in tech-heavy disciplines. "Two hundred countries might be able to train runners," says a German Olympic official, "but wind tunnels and digital testing is something Burundi can't yet afford." While the institute has been urged to raise funds by selling its technology, it has resisted doing so for fear of aiding rivals. In Athens, it is the crew and canoe teams that are expected to shine most brightly for Germany.

For now the reforms seem to be working. A projection by the Interior Ministry puts Germany back into third place behind the United States and Russia. Unless, of course, bronze-medal syndrome strikes again.