Two of Greece’s biggest projects — together valued at about 11 billion euros ($12.8 billion) — have stalled on bureaucratic and legal wranglings, raising questions about the country’s ability to draw investments it desperately needs for an economic recovery.
Lamda Development, which is managing the Hellinikon site, the biggest real estate investment in country, said on Friday that Greece’s efforts to go back on terms already agreed to “violates the necessary trust between the parties.” That statement came a day after Canadian mining company Eldorado Gold Corp. announced that it’s taking legal action against Greece for its failure to issue the company permits needed for its Skouries project.
The setbacks come as the government of Alexis Tsipras tries to lure much-needed investments to revive an economy that has shrunk by more than 25 percent since the beginning of Europe’s debt crisis, with an unemployment rate of more than 20 percent. Gross domestic product is expected to expand by 1.6 percent this year, according to the latest estimates from the European Commission and the Finance Ministry, which revised a previous target for 1.8 percent expansion. The economy is projected to grow by 2.5 percent in 2018.
The government hasn’t had much to say after the latest twist in the two projects, both of which have dragged on for years. Lamda shares tumbled as much as 9.6 percent in Athens on Friday. Eldorado shares have dropped more than 60 percent in Canada this year, in part because of its Greek woes.
The Canadian miner has a history of troubles in Greece.
The company acquired Greece’s Kassandra Mines in 2012 for about $2 billion and since then has invested an additional $1 billion in the country, according to its Chief Executive Officer George Burns. In January last year, it amended its investment plans because authorities wouldn’t issue the necessary licenses.
Then in September, the company threatened to suspend its operations in Greece because of delays in the issuance of routine permits for the construction and development of the Skouries and Olympias projects in Halkidiki, northern Greece. A few days later Eldorado and the Greek state entered into an arbitration process for all issues concerning the investment.
The government declined to comment on the company’s legal threat, pointing to the ongoing arbitration process.
On the Hellinikon project, the issues are of a different nature.
Greece’s archaeological council ruled in October that construction was possible on the site of the old Athens airport Hellinikon, subject to additional conditions. Developer Lamda said on Friday that there has been “an unexpected change in the contractually agreed terms, which adversely affects the Integrated Development Plan.”
The company said it can’t invest funds as long as there are “continuous setbacks and new obstacles” and demands that “are not provisioned in the contract.” Ministerial decisions issued after council’s decision “raise concerns regarding the possibility of the materialization of the development,” it said.
Hellinikon is considered a landmark project included in Greece’s privatization plan since the first bailout program in 2010. The sale was supposed to have been concluded in 2014. While Lamda didn’t threaten to withdraw from the project, it said that it needed “the necessary commitment” from the authorities concerned.
“In an otherwise positive economic environment, this is bad news for investors,” said Mujtaba Rahman, managing director of Eurasia Group, an advisory firm. “It again raises questions about the competence and objectives of this Syriza government.”