European Union uses eurocrisis as alibi to push privatisation of water services

In response to the eurocrisis, most EU countries are imposing austerity policies designed to reduce public deficits and bring down state debts by cutting down public spending on health care, education, social services, nature preservation, development aid and more. Jan Willem Goudriaan, deputy secretary general of the European Federation of Public Service Unions (EPSU), tells the story of how the EU sought to brush away a clear no of the Italian people against water privatisation but how this failed as a result of strong campaigning by the broad and vibrant Italian Water Movement.

Mass demonstrations, general strikes, the occupy movements and the actions of the indignados have repeatedly brought millions to the streets since 2008 to protest at the austerity policies in Europe. These policies which include the privatisation of public companies and services are supposed to deal with growing state deficits and debts. The fact that the deficit was caused by the massive hundreds of billions of euros of tax payers money poured into taking over and saving the banks and for public spending on social security for unemployed workers and growth stimulating policies in 2008 and 2009 seems to have been forgotten. This prevented a melt-down in the rich-country economies which would have led to severe economic depression. The real causes of the banking crisis were the deregulation of the financial system, the privatisation of public services including public banks and the growing inequality and widening gap between the rich and the rest of us so well symbolized by the We are the 99% movement in the US.

Europe’s people suffering under austerity

Most countries in the European Union and beyond, such as Croatia, Serbia and Ukraine are suffering under austerity. Austerity policies are designed to reduce public deficits and bring down state debts. To do this cuts are being made in public spending on health care, education, social services, nature preservation and development aid among others. The wages of public service workers such as nurses, teachers and firefighters have been frozen for 2-3 years or even cut – as in the case of Latvian nurses – with more than 25%. And this is happening in nearly half of the EU member states.

Austerity measures are also being used to increase the pension age and reduce the minimum wage. The scale of the attack on public services is being felt in almost all EU countries. Over 1,900 schools have been closed in Greece. The Belgian government has slashed energy efficiency programmes which provide subsidies for insulating homes. More than 60 nature reserves have been closed as part of cost-saving measures by the right-wing coalition in the Netherlands which fell in April 2012. The costs of public transport and other public services are increasing in some places, as for example in Spain. And as public investment is slashed, small and medium sized companies are losing public contracts and can provide fewer jobs. In many countries retiring public service workers are not being replaced which has a knock-on effect on the quality of services and increases the workload and stress for other workers. In some countries like Romania and the UK hundreds of thousands of public service jobs have been cut, affecting over a million families and their communities.

These policies and the choices that have been made are not politically neutral. The attack on public services is part of a broader set of policies intended to roll back the rights and protection that workers and citizens have enjoyed and known as the Welfare State. It is replaced by policies that ensure that businesses are advantaged and tax payers’ money goes to pay for corporate welfare. And in several countries, unions have been attacked for defending workers and citizens. In the Czech Republic, Estonia, Hungary and Romania laws have been adopted to weaken unions and shift the balance of power further towards corporations. And governments are not only seeking to weaken unions at a national level. The proposed European Monti II regulation, named after former Goldman Sachs adviser and current Italian PM Mario Monti, seeks to regulate the trans-border right to strike and is part and parcel of this set of policies, defining the freedom to provide services and goods as a primary law that justifies limiting the right to strike. It is a breach of ILO standards and of the European Social Charter which both consider the right of workers to protect themselves as a fundamental right to protect human dignity. Workers are not commodities.

A coordinated attack

The full-scale attack on Social Europe is being coordinated by the European Commission, through the Annual Growth Survey which is part of the European Semester. Led by its conservative president, Jose Manuel Barroso and supported by a conservative majority in the European Parliament and a similar majority of conservative government leaders in the Council of Ministers, the European Commission has demanded that EU member state governments balance their budgets. The conservative duo of French President Nicholas Sarkozy and German Chancellor Angela Merkel, backed up by the European Central Bank (ECB) Presidents Jean-Claude Trichet and now Mario Draghi, have been the main architects. And while it becomes increasingly clear that the coordinated austerity policies are driving many countries including Greece, Spain, Portugal and Ireland into recession, the conservatives have so far been able to prevent an alternative approach from being implemented.

A tax on the rich or increasing the tax level to 80% for those with a high income, as it used to be in the 50s and 60s, are not part of the current proposals. Neither are governments adopting policies to strengthen collective bargaining, increase minimum wages or reduce inequality. While corporate profits are soaring, the bonuses for bank and other company bosses remain uncapped and unregulated. In an attempt to prevent such policies from ever seeing the light in the EU, the former vice-president of Goldman Sachs and now the President of the ECB, Draghi rang the death knell for Social Europe by heralding the death of the old European welfare model in interviews with Bild Zeitung and the Wall Street Journal earlier this year. He urged the German government to continue with their low wage economy to improve competitiveness. This is the same Draghi who in August 2011 co-signed a letter with the then ECB President Trichet demanding fundamental policy changes in Italy in return for ECB support.

An Italian example of the ECB seeking fundamental change

Less remarked on is the fact that a key policy proposed by the ECB for Italy, to privatise water services has not been adopted by Monti, the Italian Prime Minister. Not because he does not want to, but because the Italian organizations that form the Italian Water Movement, through action, including civil disobedience, have forced the Italian government to withdraw a proposal to liberalise water services on 19 January 2012. These protests followed a referendum in which a large majority (>90%) spoke out against the liberalisation and privatisation of the water services in June 2011.

But why would the Italian government seek to adopt a policy that was so clearly rejected by its people? Italy was in dire straits in early July 2011. It needed money and was looking to the ECB to help by buying Italian government bonds. In return the European Central Bank demanded that Italy reform. Italy needed a “comprehensive, far-reaching and credible reform strategy, including the full liberalisation of local public services and of professional services. This should apply particularly to the provision of local services through large scale privatizations”. This was part of a secret letter signed by Trichet and Draghi, the outgoing and incoming Presidents of the ECB, in July 2011. The secret letter argued for many other measures to be taken including pay freezes for public service workers, cuts to public employment and labour market flexibility. Measures such as the liberalisation of public services are called structural reform in Euro-speak.

The Berlusconi government adopted several proposals in the ECB letter. However it did not go ahead with the liberalisation of water services. This triggered European Commissioner Oli Rehn to ask the Italian PM: “Could further information be provided to explain which reforms are envisaged in the water sector despite the outcomes of the recent referendum?” This was in his letter seeking clarification on the many measures the Italian government had proposed (bold our emphasis). The Monti government provided further clarification and announced additional measures, but it did not answer the repeated request for water privatisation.

The European Commission evaluated the measures in a report for the Eurogroup on the 29 November 2011, arguing that Italy was not doing enough and additional measures were needed. One of these structural reform measures needed was “Enhancing competition in key network industries. (…) Other sectors, such as telecommunications, postal services, water and transport, are also significantly shielded from full competition pressures. (…).”

The Monti government started to address these measures but has faced opposition from the Italian water movement which mobilized against the proposals. EPSU wrote to the Italian Prime Minister pointing out his lack of a mandate to seek the privatisation of water services and the serious European repercussions if his government went ahead. The final package of measures did not include the privatisation of water services, a significant victory for the Italian water movement (including EPSU affiliate CGIL-FP).

The Council puts liberalisation of water services back on the agenda

The debate about privatisation of Italian water services takes the European Union back ten years. DG Competition and DG Internal market have been trying to open up water services ever since the time of the former European Commissioner Frits Bolkestein. Ten years ago he put forward policy proposals and argued for opening up water services. The European Parliament reacted strongly to his emphasis on the internal market and queried whether, “in the light of experience with the liberalisation of the electricity and railway industries and having regard to the economic slowdown, whether this experiment should be extended any further in the absence of proven benefits and certainly not in the area of water supply and treatment, since it tends to divert attention from the real problems and may jeopardise security of supply” (bold emphasis added). The Parliament rejected these proposals in 2004.

The European Commission and ECB are now pushing for structural reforms in several countries in distress including in Greece, Italy and Portugal in which they want to see the liberalisation of water services or even the full scale privatisation of public water companies like in Portugal and Greece. The water companies in Thessaloniki (EYATH) and Athens (EYDAP) are on the list of companies to be privatised. And like elsewhere people do not buy it. They don’t believe that privatisating a water company will help to bring economic growth. The Thessaloniki water company workers, their union and major citizens groups have set up ‘initiative 136’ to prevent the privatisation of what they consider to be their company which they created with their labour and their public money. If the opposition fails, they will attempt to buy the company, with 136 symbolising the share each citizen will have in what could become a non-profit company with participatory decision-making.

But while a large majority of Europeans invariably oppose liberalisation of water and privatisation of public water companies, the European Council in its discussion on the Austerity Treaty (30 January 2012) also agreed to “growth enhancing structural reform” which would include the further liberalisation of network services. “The Commission will report annually on progress made towards releasing the growth-creating potential of a fully integrated Single Market, including as regards network industries.” It is against such proposals that the European Federation of Public Service Unions (EPSU) is preparing a European Citizens Initiative to stop the liberalisation of European water services and implement the human right to water. (

Privatisation of public services is a bad idea

It is clear why the ECB and conservatives are seeking to privatise public water companies and other public services. They are ideologically against services being run by public authorities believing that private enterprise can do a better job. They are also acting as if they are the proxies of corporations that stand to gain when public assets are sold off. But why is it that so many people are opposed to selling of water companies? A lot of research has been done since the 1990s into this area. It has shown the history of publicly-operated water has come about because of private sector failure to deliver. It has demonstrated the economic benefits of the public option.

Research by the World Bank and the IMF has found that there are no significant differences in terms of the efficiency of public or private utilities. It has been public investment that built the water and sewerage companies which in turn have delivered public health benefits. Compared to publicly operated companies, privatised water companies charge more for their services.

What is more, the private sector companies active in Europe’s water services have a history of corruption and cartels. For workers, privatisation has led to outsourcing, lower pay and worse labour conditions. While a strong argument against privatisation is that all being equal, the private sector is more expensive because it needs to top up prices with a profit margin, I think most people instinctively feel that public services should not be run for the benefit of the very few. The policies pursued by the ECB and the European Commission to force privatisation on countries in economic difficulties are not only economically wrong but morally wrong because they only privilege the few.

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