Opening taps in Germany and Europe

Paper delivered at the World Social Forum in Porto Alegre, 26 – 29 January 2005

Klaus Lederer, Berlin/Germany

The successful outcome of the Uruguayan referendum of 31 October 2004 in which the population demanded including the protection of water in the constitution is a significant signal for all those who campaign against the commercialisation of water resources and management. Success stories that reach out to the people, mobilise them for new paths and strengthen our self-confidence have not been found in abundance in economic and political developments of the recent past. When it comes to who will have access to water resources and infrastructure and on which principles this is going to happen we urgently need concrete positive experience, results and role models.

The global signals of the past three decades have been contradictory. In 1977, the community of states established in Mar del Plata the right of all people to drinking water in sufficient quality and quantity for their needs. The 1992 global summit of Rio de Janeiro confirmed this in its Agenda 21, Chapter 18. Ambitious goals were postulated. All people are supposed to have access to clean drinking water and water management to be subject to the principles of sustainable development. Then again, there is the international water lobby, which in Marrakech in 1997, The Hague in 2000 and in Kyoto in 2003 tried to redefine water as a commercial good the supply of which had to follow the principles of free competition. Most industrialised nations now follow the Washington consensus. International development aid institutions, too, pin their hopes on multinational water management corporations and have been trying in vain to prove the feasibility of this strategy by means of selected major projects.

We have to observe closely what the response of the free trade and water market lobby will be on an international scale to the Uruguay referendum. I think there will be reactions. Whatever the outcome of the battle for water may be in Uruguay – and in other countries in the region that might follow the example – is of decisive importance to the balance of forces, too, in the strongholds of capital. Insecure investment situations cause capital to flee. David Hall reported from WWF III in Kyoto that multinational corporations clearly regard even the organised resistance in the countries of the South as a serious business obstacle. However, it is also a challenge to them. The World Bank adheres to the strategy of private water management as well. Pressure on the public control of water use and management is mounting although reality shows all too clear that handing water infrastructures over to multinational corporations is wrong in financial, social and ecological respects.

This also shows in the German and European situation in comparison to Uruguay. In Germany, water management has been a public utility for many decades. Thos who want to use water cannot simply do so because they own land or water infrastructure property. The use of water resources is subject to general interest. This makes it impossible to establish a private property right of water resources enabling the owner to use and exploit it. The reason given for this is that water is an important vital good and resource. Individuals are not meant to have power of disposal over water. The German constitutional court saw this landmark decision as being in keeping with property as a fundamental right and necessary for provisions for the future in 1981.

In recent years the ecological aspect of water, i.e. the protection of the resource, came more and more into the focus, a tendency which was noticeable to varying degrees in all European countries. Meanwhile this process has come to a halt having to do with changes in water management as well. These changes are (still) not manifest in liberalisation or privatisation. Yet, public companies look different today compared to 20 years ago. Their organisational basis has changed and they tend to display a different conduct. Let me explain this briefly:

Up until recently German water management was nearly completely under public control. Local communities were de facto and de jure only responsible for executing these tasks properly in their catchment area. However, no one but these communities was able to set up and operate an efficient water management. Therefore, 6,000 water supply companies and just as many sewage treatment companies thus traditionally marked the German water management landscape. Equipped with fixed areas for water supply and sewage disposal they gave a guarantee for many years in Germany that actors that were not completely independent of third-party interests but could at least be influenced by representative democracy offered affordable and reliable quality water supply and sewage disposal. This way the local communities had the chance to change “their” water management infrastructure in compliance with the local development policy.

Meanwhile many sectors of local services were opened to private take-overs on European initiative and also backed by current German politics. This formed the basis for a capital and corporate concentration mainly in the electricity and gas supply sectors but also in other so far public services, which the German government endorses. A surplus of capital privately accumulated due to decreasing investment options in the classical utilization areas is looking out for profit options and has discovered the public sector. What they have to expect is hefty profits because investment in infrastructure grids is about large amounts on a long-term basis. This is how Eon and RWE emerged. Flanked by an effective privatisation, liberalisation and deregulation ideology, which is basically endorsed by large sections of the population, such actors find favourable starting conditions. The reason for the political support for these parts of capital is the intention to give the domestic economy “a good starting position” in the increasingly globalised economic sphere of action.

In comparison local communities largely face financial ruin. Having been mainly representatives of the citizens’ interests in their federal state – also in social affairs – they beg for financial relief under this fiscal pressure in order to be able to control their debts and limit debt servicing. Even the ongoing dismantling of social services is hardly enough to alleviate the additional burdens that are heaped on their shoulders because the policy of redistributing taxes makes them poorer and poorer. Local communities give their public infrastructures differing treatments. Some sell as much as they possibly can. Others, mainly bigger communities, try to get their public utilities and amenities to shape up for a more expansive line. Others auction off licences for their urban infrastructure. Some try to meet the responsibilities of their public duties, however, are also exposed to much more pressure from having to be profitable. This is also reflected in their organisational structure in which democratic control and political involvement are losing influence.

It is a remarkable success of organised population, local communities, trade unions and federal states that water management unlike electricity and gas has not been liberalised yet. When the German government of the Social Democrats and Greens wanted to open the drinking water sector to the market 5 years ago so much pressure against these plans caused the government MPs to deny approval for these plans. An amendment of competition legislation was dropped. However, this did not mean any wavering from the course of concentration and private investment. Yet, a nationwide spread of the British or French pattern in the public water sector was excluded for the time being.

There is no reason for euphoria though. That is not just because the debate on the prospects of the water management hardly reached out to large sections of the population. A creeping development in water management is going on and increases all those effects that make the water sector an object of European competition legislation: currently a silent concentration process is going on. Major suppliers gain strategic ground. They buy into public utility companies, take over management or entire networks and facilities.

In principle local authorities can still decide though how to run their water management in future. However, under pressure from increasing legal uncertainty, budget problems, private offers and widespread faith in the market it is getting ever more difficult to make decisions that are adequate to the issues and sovereign. Mounting technological and economic requirements for the maintenance of the public water management pose a problem because the situation of the resource is deteriorating, technical improvements are still favoured compared to integrating water management as a one-dimensional solution and a sustainable handling of water as a resource still leaves a lot to be desired. Public-private partnerships of this kind only solve the problem temporarily. The authorities usually say: “You can have what you want as long as you pay for it.” Many communities let themselves in for horrendous deals for lack of experience. However, their independence in terms of calculation, their budget restraints (guaranties), their infrastructure policy (knowledge, interests and actual access to facilities) and on a long-term basis also quality, price and the extent of services (contracts and duration) are at stake. As this is about much money these deals are particularly prone to bribery and conspiracies in favour of private interests. Medium-size businesses that cannot obtain stock capital in financial markets and function less profit-oriented are pushed out of private-local cooperation and occasionally integrated in the major utility companies.

One example for a grave wrong political decision, which does harm to the scope of the authorities’ action in the end is the partial privatisation of the water management company in my city, i.e. Berlin by the then government of Christian Democrats and Social Democrats in 1999. For possibly the highest price (€ 1.5 billion) a consortium that meanwhile is only formed by the multinational corporations RWE and Veolia (which hold 50% each) received 49.9% of the water management shares and the licence to run the company. The minimum duration of the contracts, which were basically made to last, is 30 years. They agreed on fixed interest rates of the capital in the company. Berlin vouched for such a yield from the budget. For three years water prices were artificially kept stable. The contract was legal and Berlin knew what they let themselves in for.

The coalition of Social Democrats and Socialists in office since 2001 in the city of Berlin now is between a rock and a hard place: either they allow water prices to rise dramatically or renounce earnings from an urban company… At the moment we try to find a golden means because raising water prices meets with limits of what is socially reasonable. Within the framework of the existing balance of power we strengthen political interests in corporate policy and enact more control over the company. Meanwhile the budget crisis has deteriorated into a financial emergency. The city is virtually financially dependent on the federal government and the other federal states. Its debts are so big that even talks to buy water management back would be hopeless at the moment. We shall see whether or not there will be some leeway in the medium term for creating a different power constellation in water infrastructure. At least employees are safe from dismissal until 2014. Yet, neither of the corporations involved pays attention to this compromise due to the current risk distribution. All in all we have a very difficult future problem that is hard to solve if at all. However, in the local public sector there are also diametrical although weak tendencies. The neighbouring city of Potsdam terminated a contract with Suez subsidiary ‘Eurawasser’ due to grave increases in prices in the negotiations for which serious mistakes had been made and illusions spread.

Even though the worst has not come to the worst yet the campaign must be waged against pledging waterworks and public utility companies. What matters is to make water management transparent and bring politics back in. There is no ideal solution to this end and often even few concrete ideas. The hegemonic modernisation strategies by local authorities at present have exactly diametrically opposed effects so that these authorities often pave the way for commercialisation. The bigger cities must be prevented from being directly or indirectly involved in this process ‘of conquering the market’ as for instance the ‘Gelsenwasser’ water supply company is planning which was bought back. The broadly based oppositional public sphere needs to reach out to the public more and commit themselves more in keeping with their objectives and issues. The question arises which feasible forms of responsible, social and ecological local resource management we can come up with. If we do not manage anything at all we need to intervene at least in favour of bearable conditions.

The privatisation trend remains unhampered. Currently the greatest danger for the future of conflicts on location lies at the European level, i.e. is a European directive for opening the market. So far the integration of the European market has affected the water sector only indirectly: via deficit limits of public budgets, the European public procurement and subsidy legislation for public services and via standards requirements. A liberalisation of the water supply and sewage disposal services was entered in the debate by individual member countries now and then, there were ‘inspection orders’ and appeals to the nation-sates such as in the Langen report of the European Parliament. So far this strategy has not been accomplished at European level. Meanwhile the screws have been tightened. The argument of the market fetishists is: If the committed companies are big enough and the range of activities exceeds borders the water sector must be regarded as a European ‘relevant market’ and be subject to European business legislation according to the economic fundamental freedoms of the EC treaty. The fact that water is a vital, scarce and perishable local resource, that water supply and sewage disposal areas are local infrastructures does not make a change because local, decentralised and protected water supply and sewage disposal distorted and impaired competition among member countries and thus had to be liberalised. This is the decisive European conflict.

Corporations and governments are strong actors in  European political networks. They are power factors when the EU acts as representative of all its member countries among the WTO member countries in the GATS talks. The European GATS contribution was thus disconnected politically from the battles about liberalisation in the member countries. In most of the EU countries public companies still run the local water management. In 2000 the Netherlands even outlawed privatisation by government decree. Great Britain, a European actor with much influence centralised its water management in the 1970s in the shape of big river authorities and then let them go down the drain. In the late 1980s the Thatcher government turned the supply with drinking water into private monopolies for good. Prices and environmental standards have been monitored by regulating authorities since then with not much success. Concentration of private disposal over infrastructure has been a strong base for revenue from private investment and expansive corporate policy. In France, a country with over 150 years of public-private partnerships Suez Lyonnaise and Veolia dominate the market. These two models are mainly referred to in the debate about water management liberalisation. German development aid and economic politics also stress the chances of competition – above all chances for exports.

In view of forthcoming new GATS steps the European Commission announced in its EU single market strategy 2004 – 2006 that effort has to be put into the compatibility of the Euro-zone. In early 2004 Commissar for competition, Frits Bolkestein, submitted a draft directive that is meant to start a market-related process of convergence in the regulating systems of nearly all service sectors in member countries including public water management. This directive is an all-out attack on the diverse regulating systems and traditions in member countries. If it becomes European law the face of Europe will change rapidly.

Basically, all services for which commercial recompense is thinkable are supposed to be liberalised. They are to be farmed out “neutrally and transparently”, and to be advertised Europe-wide as a rule. This comprises social, educational, health services, water supply and sewage disposal, of course, among other things. Another pillar of the directive is introducing the home state regulation, which means that those states are responsible for monitoring and regulating the services in which the company selling the service is based. This does not apply to all sectors though; water has been excluded. However, no sector could wall itself in from the economic shift of balance and social dumping processes and no member state could effectively exert economic control across sectors and in concrete cases. This even went too far for the German second (federal) Chamber of Parliament, the Bundesrat. It can be surmised that in such a process all local quality standards and investment pledges, requirements for prices and agreements on transparency would soon be put under the microscope as “trade barriers”. The foreseeable consequence would be an erosion of public influence. Many disputes about the future of water management would no longer be decided at local level.

There is not much time left for intervention. Water is a precious good. Many people know that. It is very suited for a fight over sovereignty of interpretation as many will be willing to take the problem seriously and take a stand. In Germany the difficulty this causes for safeguarding and accomplishing the constitutional programme of protecting the water resources cannot be ignored even now. After ‘Bolkestein’ public water management would be gone in large areas. What is at stake now is not only the water price but also the primacy of political decisions over private rights of access to vital scarce resources. Parallels with GATS and the WTO are conspicuous. Established as a one-way street of development with a legislative body that produces major requirements by the hour and a court that is responsible for their observance and can impose sanctions for violations constitutes a true market power bureaucracy.

We insist on another form of regulating international and local matters pertaining to water. This is not possible without long-term efforts. However, we can also relate to recent international voices who take our consensus to the political space. UN High Commissioner for Human Rights, Vieira de Mello appealed to the community of states in Kyoto 2003 to include access to water as a human right in international law. And the ‘Peoples’ World Water forum’ 2004 in Delhi demanded in its final declaration a world water convention focussing on water as a vital natural resource in which everyone can participate. Unless this is not just meant to produce noble commitment to water leaving its commercial use aside it should be as binding as possible. That is why we have to tap those many contradictory local experiences to derive from them jointly concrete requirements to a social and sustainable global handling of water.