On 24 April, Greece's Central Archaeological Council (CAC) postponed its decision on the legality of an already-constructed 10-floor hotel in the Makriyianni district of Athens near the Acropolis, to await a ruling by Greece's highest administrative court. CAC's opinion is required for the construction of buildings in archaeologically sensitive areas.

In January, residents in the area asked the Environment Ministry to intervene and revise construction regulation around the Acropolis, objecting to the development of high-rise buildings nearby. In March, the ministry suspended for a year the provision of new building permits for constructions higher than 17.5 m around the Acropolis. Earlier in April, in a separate case, CAC ruled that part of the area around the port of Piraeus is of archaeological interest and voted against the construction of a shopping center next to a new cruise terminal. The proposed development is part of a EUR580-million (USD646-million) investment program by Chinese investor Cosco, the port's owner.

Significance

Project delays and significant uncertainty for business activity are likely due to blockages by individual agencies in granting environmental and other permits. The recent project rulings are likely to be driven by political considerations ahead of the local and European Parliament elections in May-June.

With the general election scheduled for October, we expect to see increased regulatory uncertainty, featuring temporary bans and delays in the issuance of permits for new constructions, which would cause project delays of around a year. Already-constructed structures in archaeologically and environmentally-sensitive areas are likely be allowed to operate. High-value projects such as Cosco's program and the Hellinikon development project near Athens are likely to get political support, but still be delayed by at least a year by inefficient bureaucracy, the complicated regulatory framework, and court challenges, and in the case of a government change, when key officials are likely to be replaced.

If the government makes changes to CAC's structure, this would indicate potential easing of controls on green-field investments in Greece. Changes in the political leadership in local governments following the local elections would indicate increased contract cancellation risks for local projects.

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Posted 30 April 2019 by Petya Barzilska, Sr. Research Analyst II, Europe & CIS Country Risk, S&P Global Market Intelligence