Nick Buxton: A massive European fire sale is one way finance is using the crisis to entrench neo-liberalism.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore.
As Europe settles in for an even deeper recession, many countries of Europe, in Greece, now of course Cyprus, in Spain, in Portugal—and we’ll see it soon, probably, in other countries, even France—a big sale is on. Some people have called it a fire sale. And what are they selling? Public assets, in order to pay off their debts.
Now joining us to talk about all of this is Nick Buxton. He’s a communication manager for Transnational Institute, which provides analysis for movements working for social and environmental change.
Thanks for joining us, Nick.
NICK BUXTON, COMMUNICATIONS MANAGER, TRANSNATIONAL INSTITUTE: Hi, Paul. Thanks for inviting me.
JAY: So how big or widescale is this fire sale, as you’re calling it? And why is it happening?
BUXTON: It’s very widespread. We’ve been looking at some of the memorandums of agreement signed by the European Commission and the European Central bank with each of the countries as it’s come forward for issues with their debt to get loans from the European Central Bank. And each of them have had to sign these memorandums of agreement with the European Commission.
When we’ve looked at the details of those agreements, it’s not just about making cuts that we most famously hear about; almost in every agreement there is a demand for privatization of key national assets and key public services. And this is not just happening in countries that we all know are at the epicenter of the crisis, such as Greece and Portugal, but many other countries across Europe are now using this as a way of pushing for it, most notably the U.K., which was a pioneer of privatization. It’s really pushing through another wave of privatization, particularly now, in fact, in the national health service.
So the economist Paul Krugman perhaps has put this best, that the crisis—austerity is not about solving the crisis; it’s about using the crisis. And that’s what our report tried to look at, how the crisis has been used to push for privatization.
JAY: Now, a group of unions and other organizations sent a letter to Commissioner Rehn, European commissioner, and asking him for their position on this issue of privatization. Here’s what Rehn wrote back to them:
As you know, the privatization of public companies contributes to the reduction of public debt, as well as to the reduction of subsidies, other transfers of state guarantees to state-owned enterprises. It also has the potential to increasing the efficiency of companies, and by extension the competitiveness of the economy as a whole, while attracting foreign direct investment.
So the commissioner seems to be saying this isn’t just about dealing with bank debts or state debts or the financial crisis. This is kind of more overarching objective of theirs. And maybe this lends some credibility to taking advantage of the crisis. In other words, crisis or no crisis, they want more privatization.
BUXTON: Yeah. And actually by itself that’s rather shocking, because if you look at the European treaty, it says that the European Commission remains neutral on whether companies and enterprises are in public or private hands, whereas if you read that letter, it’s very clear that they’re not at all neutral and they’re not even pretending to be neutral on this key issue. So there’s quite clearly an agenda, a very clearly marked out and publicly spoken agenda to privatize and deregulate.
JAY: And it’s kind of ironic given it’s privately owned banks that have created—have triggered this whole crisis.
BUXTON: Exactly. And it still comes back to that argument that continues, the myth that this was a crisis created by public debt, whereas if you look at all the figures and the stats, the debts’ levels were very low, and they actually still remain well below U.S. levels even now across Europe, until you have the banking crisis. And it was only as the bailout of the banks—I mean, it was EUR 4.5 trillion went to bail out the banks from E.U. money. That’s aside from all the U.S. federal money that went into bail out European banks. All that money was what created the debt crisis. And yet we’re still getting the argument very much that this is a problem of public debt and public spending.
JAY: So give us some examples of the kind—the scale and types of privatizations that are taking place or plan to take place.
BUXTON: Well, perhaps the largest is Italy, where they’re expecting, projecting up to EUR 570 billion of money coming from sales, largely of huge amounts of heritage and state national assets being sold off, but also energy, transport, most of the sectors you’re talking about. Water is almost universally tackled, despite the huge controversy that there’s been for many decades now about water privatization. But also energy, transport, water, electricity, health, and a whole group of other services, and any kind of national companies, like telecommunication companies, airlines, bus companies, and so on. So it’s right across the whole sector. I think Greece is obviously where you’re seeing some of the most extensive privatization being pushed through.
JAY: Yeah, I think they’re planning to sell the two biggest ports in Greece.
BUXTON: The two biggest ports in Greece. It’s their main energy companies. The most controversial ones at the moment have been fought around water in Thessaloniki and Athens, where they’re pushing those things through.
And it’s also happening in—and perhaps one of the most controversial cases is—just to show how this is really an antidemocratic decision by the European Union is Italy. In Italy in 2011, June 2011, there was a massive referendum of the Italian population. Ninety-five percent of those who voted in the referendum voted against the privatization of water and public services. And what’s shocking is that just three months later, in August, the European Commission writes to the Italian government, saying, you need to liberalize and privatize these public services, completely ignoring Italian public opinion and really putting a sham on the argument they’re representing a democratic opinion. And it was really antidemocratic sentiments. And it was only as a result of huge public pressure that the Italian government didn’t cave in. And, finally, it was the constitutional court last year who said that actually it was illegal under the Constitution, because of the public opinion, for the Italian government to proceed with privatization. [crosstalk]
JAY: And I guess—. Go ahead. Sorry. Go ahead.
BUXTON: Yes, it’s causing—and this is something that’s not been accepted by a large amount of European people. So it’s something that’s been resisted very actively.
JAY: Well, I guess it’s one of the sectors left where capital can go. I mean, there’s so little place, in terms of the productive economy, that you can invest in, where the space isn’t already taken up, plus purchasing power is not really growing. So where’s capital going to go? It’s either going to go into derivatives and speculative areas, where people with money can kind of gamble against each other, or you can pry open these public resources with almost guaranteed markets. I mean, if you control a city’s water supply, you know you’re going to sell water.
BUXTON: Absolutely. Absolutely. And it’s almost a guaranteed ability for corporations to profit. I think that’s very much at the core of it, because it’s not about raising a lot of money.
It’s interesting. Greece was projected initially to raise EUR 50 billion through its sales. They’ve now revised that down to EUR 25 billion. That doesn’t mean less is being sold off, but they’re now expecting much less money to come in, because corporations know that Greece is in crisis. They’re able to get assets at very cheap prices, and they’re not going to pay more than they have to. So we’re not talking about a lot of money, but what they do then is have a guaranteed income stream.
And we see that very clearly with privatization that’s happening in places like the U.K., because if it’s about reducing state money, then why is it that the U.K. government in more than ten years, 15 years after railway privatization is still shelling out $4 billion or EUR 3 billion to private railway companies? It’s because those state subsidies continue, but rather than being invested in public services, it’s going towards shareholders and a few corporate executives. And what you see in U.K. and many privatized services across Europe is some of the highest prices, and much higher than public services that remain in public hands. So the money, the state money is still being given to these companies to survive, supposedly, but it’s now being funded towards shareholders and corporate bonuses rather than being invested in public services.
JAY: Yeah, it’s kind of a crazy mentality. They seem to have—they being the people that are driving this kind of agenda—they seem to have this faith that it’s, you know, only a matter of time till the economy comes back and everything will be growing again and then we’ll own all these great positions, where before their eyes they’re driving Europe into a deeper and deeper decade- or decades-long recession.
BUXTON: Yeah. I think there’s a lot of contradictions going on here. I think that suddenly this drive to deregulate and privatize, which we know is what led to the financial crisis and to the European crisis, now being used as, supposedly, a solution to it is in itself crazy. But it’s very much part of an agenda that’s being driven forward in Europe, and particularly within the European Union since the Lisbon Treaty a few years ago. It’s been a whole bunch of European measures. So this is really a continuation.
But we’re seeing that that policy is—and it’s a policy that’s pushed by some of the biggest business groups. What’s interesting is the European Commission positions are very close to that of Business Europe, which is the main—one of the biggest lobbying groups. And yet it is leading into this recession. It’s [incompr.] deep in it. It’s not resolving the crisis. And it’s likely in the end to affect corporate profits either way. But it seems that there’s an ideology here that we cannot let go of, and regardless of its costs.
And, unfortunately, its costs are not primarily economic at this point. It’s social. And we’re having some really disturbing pictures now unfolding in Europe. As part of our report, we looked at the unemployment figures, and youth unemployment in nearly all of these crisis countries that are going through the debt crisis most severely are now reaching 50 percent—that’s one in two young people under 25 unemployed. And the long-term costs of that are hard to judge, but it will actually be very severe.
JAY: And a large proportion of those young unemployed people are people that have actually graduated from university. It’s not like undereducated or underskilled or something. These are actually skilled and educated people that are unemployed.
BUXTON: And that’s going to have very long term costs, and those are—which are quite disturbing, and let alone all the other things that are being put aside, such as necessary needs for investment in green energy and in environmental conservation and so on. So there’s going to be some very serious long-term costs of this. This isn’t something that’s just about corporate profits. It’s also about the long-term future for many Europeans.
JAY: Right. Okay. Thanks for joining us, Nick.
BUXTON: Thank you.
JAY: And thank you for joining us on The Real News Network.