Private Property: Is Water the Price of Union?

As Austria’s political parties unite against water privatisation, some suggest the European Commission is masking intentions to open the public service industry to the private sector

Top Stories | Margaret Childs, Philippe Schennach | March 2013

Is water the price of union? | Photo: Fotex Medien Agentur GMBH/Rex Features

Austrians love their water. According to the Organization for Economic Cooperation and Development, 94% of Austrians say they are satisfied with water quality. When restaurant owners attempted to charge for tap water in 2009, it was cultural blasphemy in a city where water, fed by Alpine springs, is seen as a birthright.

When Austria held a referendum on EU accession in 1994, sovereign control of water was a key issue for the opposition. So, when a majority of the European Parliament (MEP) recently voted in favour of a new directive on concessions – including the idea of opening water works to the free market – the Austrian media shifted into high gear, broadcasting that the European Union (EU) was threatening water availability, quality and price.

The European Commission (EC) has already admitted to promoting water privatisation in countries that use the bailout plan, like Greece and Portugal, as a condition for receiving aid. As foreign interestes hone in on Greece’s public utilities, water workers are forming co-operatives to counteract the quasi-austerity measures. Portugal’s sovereign control of waterworks has already been dismantled.

At the heart of this debate lie deep-seated contradictions: While water is poised to become the chief commodity of the 21st century, in 2002 the United Nations Committee on Economic, Social and Cultural Rights has also formally recognised that "sufficient and safe drinking water is a precondition for the realisation of human rights."

But this is not just about water. The uproar over the directive reflects a widespread concern about the privatisation of public services, or Daseinsvorsorge, literally "provisions for existence".

The Austrian Federal Council (Bundesrat) saw the EC’s proposal to award concessions as a move to privatise water services, still primarily in public hands.

As a partnership between the state and either public sector clients or private companies, the concessions give a company exclusive rights to operate, maintain or develop infrastructure (ports, water distribution, parking garages, toll roads) or provide services of general economic interest (energy, water and waste disposal).

The disputed directive was a particularly sensitive topic in Austria, Germany and Luxembourg.  In Austria, the fees for waste collection, water supply and sewage disposal are low by EU standards. Vienna’s drinking water flows from mountain springs near Schneeberg, Rax and Hochschwab (offically owned by Vienna) and reaches the Austrian capital 36 hours later under strict regulation. In 2001, under the Vienna Water Charter, the city promised citizens guaranteed water quality rather than maximum profit.

Austria’s local communities (Gemeinden) see greater danger. Unlike in other countries, they have been self-administered since 1849. This could have severe consequences for small towns. When they cannot afford water works or waste removal, towns often work together, an approach prohibited under the new directive.

Several municipal undertakings have been restructured in the private sector, declassifying them as communal enterprises. Wiener Stadtwerke Holding AG is Austria’s biggest communal service provider, wholly owned by the City of Vienna.

Communities also fear a loss of transparency, self-determination and democratic decision-making that are fundamental to the Austrian public service model.

Brussels’ muscle 

In response to the uproar, Internal Market Commissioner Michel Barnier denied that new directive would "lead to forced privatisation of water services." In a recent commentary in the Austrian daily Der Standard, he claimed it was "in fact quite the opposite: it sets minimum transparency requirements for public authorities that choose to outsource a certain service."

According to the EC, the primary objective is to assure legal certainty for public contractors by regulating public service concessions, regulations that are absent in the existing legal framework. Under the proposed rules, any concession over €5 million, would require public disclosure and the community must choose the best price for the service on the free market. While the EC’s decision to support water privatisation violates key articles of the EU Treaty guaranteeing neutrality on water ownership, an investigation by the German TV-Magazine Monitor concluded that the Commission seemed determined to find ways to transform the European water sector by exposing it to "competition" through public procurement.

With studies showing a large majority in favour of communal management, Monitor discovered that the steering group advising the EC included representatives of water and related industries. Barnier evaded responsibility: "The group wasn’t assembled by me personally," he said, "but if you’re suggesting that our expert group should be more balanced, I agree."


Citizens paddle against the current

The deep-seated unpopularity of municipal privatisation stems from past failures. An August 2012 study by the University of Greenwich, for the European Federation of Public Service Unions (EPSU), found that while most European water operators remain publicly owned, there is a growing trend towards re-municipalisation. Paris recently retrieved control of their privatised water services due to efficiencies, with other cities like Berlin and Budapest following suit.

In a separate article, EPSU reported that after 25 years of privatised water services in the U.K., a national poll revealed 71% of the British public as unsatisfied and eager to re-nationalise the water industry. According to EPSU, "the lack of [private] investment is showing in continued leaks, while the private nature of the business is clear by continued profits that are not re-invested."

Increasing pressure from the EU Parliament and its citizens has led the EC to rethink its approach to water supply. The largest European Citizens’ Initiative, Right2Water, collected signatures opposing the privatisation of the water supply services in the EU. To date, 1,197,908 signatures have been collected.

The citizen’s initiative marks an important step as pressure remains on public utilities to privatise. If Bernier is to be believed, there will be no requirement to privatise water. However, his retreat does not apply to countries receiving EU aid.

In Portugal, the "Troika" (the EC, the International Monetary Fund (IMF) and the European Central Bank) have set an aid-related requirement to privatise. According to the Blue Planet Project, "the Portuguese have seen a drop in personal incomes of up to 50%. Yet water rates are rising drastically and private companies are blocking access to free public water supplies, such as drinking water fountains. In the mean time, IMF-imposed cuts [...] have prevented municipalities from improving access to water or the quality of services."

As the population is faced with no alternative for sanitation, further Troika funding cuts will reduce local authorities’ ability to invest.

In Greece, water works in Athens (EYDAP) and Thessaloniki (EYATH) are for sale. As the country drowns in debt, Thessaloniki’s citizens are organising Initiative 136, aiming to establish a network of co-operatives to buy the city’s water utility from the government. According to George Archontopoulus, of the EYATH workers union, "we are not fighting for our jobs, we fight for our water, for poor people who cannot pay the water bill."


Watering down the outcome

The EC’s approach is essentially ideology-driven, based on assumptions of the superiority of private sector services, as well as a belief in the universal applicability of "competition" as a quality and price stabiliser. Studies show, however, that public water operators often perform far better than their private counterparts, with higher quality, less leakage, stable tariff levels and overall sustainability.

If the greater good were the objective, forcing universal competition on public services seems counter-intuitive. "If it ain’t broke don’t fix it."

EU Committee Chairman Stefan Schennach saw Bernier’s backing down on 21 February as a turning point. "Following enormous pressure by the Right2Water initiatve, national parliaments, EU-delegates and the referendum organised by the City of Vienna, the EU Commission has made a U-turn," Schennach explained.  "But this is a strategic retreat," he added, "to mask its intentions to continue privatising the public service industry."

The Austrian government stands by its right to decide on public services at the national level. However, the success of the Citizen Initiative represents a precedent – the first group to reach over one million signatures EU-wide.

Water has thus become a symbol, uniting citizens in their desire for public services that remain accountable to the democratic electorate.  Essentially, it is a debate over values, over having a say in the quality, price and availability of the "provisions for existence".

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