Although international exprerience shows that water privatization is harmful to the interests of citizens, the Greek government is pushing ahead with privatizing water supply and sewerage companies. This report for UNFOLLOW magazine presents several sides of the issue, including a much debated attempt to claim the Thessaloniki water supply company for the people of the city.
By Christos Avramidis and Antonis Galanopoulos
“The idea that water is a human right comes from ‘extremist’ NGOs. Water is a food like any other, and must have a market value,” said the president of Nestlé in 2005. This is perhaps the only man who found it in him to label the UN, which registered water as a human right in 2010 by 122 votes in favor and 41 abstentions, “extremist” – though it has to be said that, interestingly, one of the countries that abstained was Greece.
Greece’s abstention, however, might be less surprising if one considers the ongoing attempt in recent decades to privatize water supply and sewerage companies. Currently, the sale process of 51% of EYATh (Thessaloniki Water Supply and Sewerage SA) is under way, while EYDAP (Athens Water Supply and Sewerage Company) is also scheduled to be offered up. Abroad, Portugal’s national water supply company has also embarked on the course of privatization. David Hall, director of the Public Services International Research Unit, believes that the new push for water privatization “is manipulated by the austerity policies in public spending and the cutbacks on public services imposed more strictly in the countries subject to IMF and EU bailouts.”
A profitable business in spite of the crisis
EYATh was founded in 1998, following the merger of the Thessaloniki Water Supply Organization and Thessaloniki Sewerage Organization. In 2001 the company entered the stock market and was divided into the sector of EYATh of assets that manages infrastructures, and EYATh SA. Furthermore, a 25% is ceded from the State to individuals. The company serves the greater Thessaloniki region, that is over a million and a half of people. It is worth noting that EYATh supplies the cheapest water in Europe.
Taking advantage of a natural monopoly such as water, the company ensures large profits. In particular, during the period 2007-2011 it achieved a profit of 75,2 million euros, and in 2012 a profit 17,8 million euros. The company also has a reserve of 35 million euros. Indeed, according to the president of the workers’ union Mr. Archontopoulos, “municipalities and other big debtors owe over 50 million euros, which shows that the investor will make payments in a very short time.” Certainly, the company’s profits are associated with the wage cuts and personnel downsizing that has occurred in recent years, as no employees have been hired since 2003, when the last call for hiring was published. Thus, while in 1998 EYATh numbered 650 employees for a smaller population and area, it currently numbers 250, with only 11 plumbers for the whole city.
In any case, Greek public water supply companies are significantly profitable in spite of the crisis. Moreover, the State and municipalities owe to water supply companies a total sum of 356 million euros, a fact which sheds a different light on the paradox of privatization: the state will lose revenue from attributed dividends, while it will have to pay its debts to the new owners of the companies with the money earned from the sale. “The winners will be the new private owners and the citizens will be the losers,” MEP Kriton Arsenis told us.
The claimants of EYATh
On 30 May 2013 the Board of TAIPED (Hellenic Republic Asset Development Fund, a company founded by the Greek government to implement privatizations) approved two investment schemes that will proceed to the second phase of the competition for the acquisition of Thessaloniki Water Supply and Sewerage Company. The first consortium consists of the French company SUEZ Environment SAS (whose name has been linked to several peoples’ uprisings against the consequences of the privatization of water) and AKTOR Concessions SA, owned by George Bobolas. The second one has been set up by the Israeli company Mekorot Development and Enterprise Ltd, the Greek construction company G. Apostolopoulos Participation SA, MIYA Water Projects Netherlands BV, of American, Israeli and Dutch interests, and TERNA Energy SA, of G. Peristeris’s interests. Infowar has reported that Mekorot is one of the main “weapons” with which the Israeli state violates basic human rights in the occupied Palestinian territories.
According to confirmed information, representatives of Suez are visiting individuals in Thessaloniki, attempting to convince them that the acquisition of 51% of EYATh by Suez should not be treated as a privatization, but as a public-private partnership. Company representatives declare to be open to debate, hear suggestions and willing to cooperate. One interlocutor commented that they are moving with an air of confidence.
Two other claimants of EYATh have been excluded from the second phase of the competition, entrepreneur Ivan Savvides and the Citizens’ Union for Water. Ivan Savvides was essentially out of the competition from the beginning, as he failed to secure the cooperation of a company in the water supply sector, and therefore did not meet the requirements of the corresponding clause of the competition. The Citizens’ Union for Water, which evolved out of Initiative 136 (K136), proposes the social management of the city’s water through cooperatives at the neighborhood level. Its Chairman,Lazaros Angelou, says: “In case all of the owners of 510.000 water meters participate, it will take about 136 euros per meter to acquire the company. According to the plan, contributions will be deposited into the ‘Citizens’ Union’ and will be converted into shares. Every natural person, regardless of the amount of money they pay, will hold one vote in the General Assembly. Decisions will be taken through the General Assembly in a direct democratic manner. There will be regular General Assemblies per quarter, while the General Assembly will be able to revoke the members of the Board with an increased majority. EYATh will no longer have a for-profit character; the profits will be reinvested in the company, or will meet local community needs.”
A few days after the decision, the Union received a letter from the President of TAIPED, stating that it does not meet all the conditions that would allow it to qualify for the next stage. The Citizens’ Union for Water said to TAIPED that it does not accept this unjustified and vague inference and filed a complaint against the decision, demanding the annulment of the Union’s disqualification, as well as the cancellation of the competition in its entirety.
Κ136 and the “Socially Responsible Investors”
According to representatives of the Union, their qualification to the next stage had been almost certain, as there was an assessment that all conditions were met. The Union would have been able to deposit the sum required by TAIPED on the day of purchase, while its loaned capital would not exceed 5,5% of the total, as required under the competition.
Mr. Angelou explained to us in more detail how the Union would have found the money to buy out EYATh: “We allowed 22 socially responsible investors (SRI) to be included in the proposal we submitted, as they met the criteria of social contribution that we had set.” As citizen participation was small, with just 600 entries, the SRIs were necessary to gather the sum at that time. “Their financial potential is estimated to be over 30 billion euros,” says Angelou, and thus the feasibility of meeting the purchase price of EYATh was documented.
At this point it is worth noting that the Union’s proposal, despite its purposes and goals, had many gaps and contradictions. Initially, it became known that these investors had not already agreed to participate, while many of them did not know any details about EYATh or the Citizen’s Union. Even the very participation of the SRIs had vague points. While the statute of the Citizens’ Union states that the SRIs will pay the buyout price on the first day of the transaction, the next point mentions that they will fund directly the citizens-consumers through small loans. It remains unknown whether the investors would agree to fund thousands of individuals with such amounts, if the money was to be credited at the outset to individuals and on what terms.
Given these gray areas in the proposal, the unique guarantee of K136 is the credibility and status of Robert Apfel, who was responsible for the communication with investors. Robert Apfel’s reliability is based on the fact that “he was entrusted even by the Greek government for designing the PSI (Private Sector Involvement),” at least according to Kostas Marioglou, a member of the Union. Apfel takes part in the initiative as head of the Bondholder Communications Group, and a “philhellene,” according to a statement by K136. The initiative is also supported by John Redwood and Citigate Dewe Rogerson. Redwood was privatization adviser and then chief policy adviser under Margaret Thatcher in 1983, he assisted her in the design of the privatization of British Telecom and British Gas, and remains a Tory MP today. Citigate Dewe Rogerson was responsible during the 1980s for the financial and business communications of almost all privatizations made in the UK.
All this of course begs the question: Why have companies and individuals who know how to privatize better than anyone else, chosen to support an initiative that maintains it is opposed to privatization?
Robert Apfel: Capitalism should be instilled in everyone
With this question, we contacted Mr. Apfel, who said: “I believe that everyone has something to gain from the privatization. Therefore, I argue that the government should privatize the assets of EYATh to bring it closer to the people. It reminds me of privatization made by Thatcher, when 62% of British Gas came into the hands of consumers. The government gave interest-free loans to citizens to enable them to buy shares. I know that many see Thatcher as Satan, but that position of her opened ownership to citizens. At just 40 pounds one could participate.”
If for us in Greece the effort of K136 looks as something fresh, Mr. Apfel perceives it as another privatization: “The privatization of EYATh in this way might be an example for all Europe. Another proposal I am making is a way for children to participate. According to the Bank of Greece, the families of Central Macedonia have in their accounts and in their pockets 2.8 billion euros just sitting there. That is the wealth of Central Macedonia, and it must be put into circulation. I believe that many in the government, including Mr. Samaras, will be excited to see 100,000 people-capitalists with 136 euros in their hands wanting to buy EYATh. We need to bring big state enterprises closer to the people, take them from the central state administration.”
It is evident that Apfel’s talk of popular capitalism contradicts the claims of K136 about an economy of social solidarity. While L. Angelou said that the plan of K136 differs profoundly from what happened in the UK, mainly because of its non-profit nature and distribution of accounts rather than shares, Apfel, in his answer to our question whether the plan of K136 is similar to the plans of Thatcher, leaves no room for misinterpretation: “Undoubtedly, yes.”
Ultimately, K136 states it is opposed the system, while Apfel seeks the dissemination of the system throughout all spheres of social life. Only if we all become capitalists, only if we circulate our deposits into the real economy will the system remain intact and overcome its crisis. The difference of the goals pursued by the K136 to those pursued by Apfel is evident; still, could it be able to lead to the same results?
The international experience: The privatization of water is harmful to citizens
All this is happening in Greece, despite the fact that there is an accumulated experience of the negative impact of the privatization of water, and an established trend of returning water supply networks to municipal or state enterprises. The rationale of nationalization is based not only on the principle that water management should be public, because it is a public good, but even on purely economic reasons, as it has been proven that public management is in the interest of citizens and the state treasury. As said to us by Mrs. Kolokytha, Assistant Professor, Department of Civil Engineers, Aristotle University, “when it comes to supplying populations, water must be treated as a social good that either the State or the Local Government is obliged to supply in an appropriate quality, sufficient quantity and at low cost. Any private company has as its primary objective the maximization of profit and obviously does not act on the basis of the general social interest.”
“The international experience shows that the privatization of water endangers citizens’ access to one of the most basic goods for everyday living. A typical example is that of Britain. The privatization of water by Thatcher brought about dramatic impacts on citizens by increasing the cost by 50% during the first four years, tripling outages in households that could not afford to pay, reducing quality, increasing incidents of dysentery and leading to repeated violations of environmental legislation,” says MEP Kriton Arsenis.
Among the dozens of cases, an exemplary one is that of Bolivia, where the privatization of water, which came as a condition for the IMF granting a loan, brought about unbearable increases in water tariffs (200-300%). The protests of the residents ended in tragedy as seven people died and the government finally decided to renationalize the network.
Water remunicipalization and referenda
Typical cases of resistance or remunicipalization can now be found in Europe as well. The most important of these is the one of Paris. In 2008, the city council decided not to renew its contract with Veolia and Suez, which had had the management of the water system since 1985. The municipality created the municipal company Eau de Paris, and in 2010 it placed under its supervision the operation of the system. We contacted Anne Le Strat, deputy mayor and chairwoman of Eau de Paris, who explained that “the choice of remunicipalization is being guided by a strong conviction that water management must obey the public interest: water is a public good, a vital resource to be controlled and maintained by a joint and responsible management. The reform embodies the commitment of the municipality of Paris to the values of public service.” Thanks to the reform, significant benefits arose: profits are estimated at 35 million euros per year, while in 2011, the price of drinking water, which had increased by 260% since 1985, fell for the first time by 8%.
In Italy, a referendum was held in 2011, with Italians voting by 95% vote against water privatization. Cynically undemocratic external pressures attempted to overturn the result, which was however ratified in July 2012 by the Constitutional Court. In Vienna, as well, citizens rejected by 87% the privatization of municipal services, among them that of water supply.
David Hall characteristically told us that “whenever submitted to a referendum, the privatization of water has been dismissed en masse.” Consequently, the proposal of the Municipality of Thessaloniki for a referendum is deemed positive, even if the outcome is not binding. The referendum gathers more and more limelight, especially after the exclusion of K136, which could have constituted a second line of defense against privatization. A dominant role is now played by the initiative SOSte to nero (Save the water), which coordinates through its assemblies the efforts of agencies and organizations that disagree with the privatization. Theoretically, the privatization of water is also opposed by all local government entities, since they have expressed through a unanimous resolution of the Central Union of Municipalities of Greece their complete opposition to the government’s decision to proceed with the privatization of Public and Municipal Water Supply and Sewerage Companies. The next move belongs once more to the government. Will it accept to hold a referendum, with the annulment of privatization being possible, and what will be the position of the President of the Republic, who has the final word on the issue? Ultimately, who rules this country? The Suez Company and TAIPED or “the demos,” the people? The etymology of the form of government called “democracy”[*] defines the second one as the ruling force. Until today, reality has belied it…
[*] Democracy: “Demos” (the people, the whole of citizens who have civil rights) and “kratos” (power, rule, sovereignty).