Can privatisation be the panacea for the lack of growth in Europe?

From left to right, Wolfgang Schüssel; Fabrizio Saccomanni; Sylvie Goulard; Leonhard Birnbaum; Christian Helmenstein  (United Europe, 13/10/2014)

From left to right, Wolfgang Schüssel; Fabrizio Saccomanni; Sylvie Goulard; Leonhard Birnbaum; Christian Helmenstein (United Europe, 13/10/2014)

An interesting topic was treated last Monday evening in Brussels and the European Sting was present to listen to some ideas on how to boost growth in the European Economy in a pragmatic manner. It would be unfair to say that the idea on the table of the discussion was original or innovative but nevertheless it was worth listening.

“Privatisation Potential in the European Union” was the topic of the event that was co-hosted by United Europe and the Bertelsmann Stiftung earlier this week and lots of people gathered to participate in the debate. The main stimulus was the presentation of the study of Economica Institute in Vienna on how much money would go in the EU’s pockets if the state was ‘convinced’ to withdraw from the public and private sector. Prominent panelists shared with the audience some interesting thoughts, Dr Chrisstian Helmenstein, Board Member of Economica Institute, Dr Wolfgang Schussel, former Chancellor of Austria and President of United Europe, Sylvie Goulard, French MEP, Dr Leonhard Birnbaum, Member of the Board of E.ON and Fabrizio Saccomanni, former Minister of Economy and Finances in Italy.

The evening started with Mr Schussel, President of United Europe and former Prime Minister of Austria, who briefly set the scene of a European Union in economic crisis with its citizens suffering from lack of European identity. Indeed this is roughly the image of Europe currently. Mr Schussel went further on, saying that privatisation is being significantly reduced since 2009. And this is mainly attributed by him to the lack of political will in the Union to endorse systematically privatisation. Moreover, he former Chancellor of Austria linked productivity with privatisation and compared Europe with other parts of the world where productivity is much more impressive than in the Old Continent.

Right after the brief introduction, Mr Helmenstein from Economica Institute, who is the main researcher responsible for this study, came to the podium. While referring to the specifications of the research, the researcher underlined his core finding, that Europe can make up to 500 billion euros if everything became private in one night. Of course, he also presented to us the figures in the case that the state withdraw by 25% or 50% from public and private companies.  Apparently the results of this study are describing an ideal European situation. Truth is, however, that most of EU leaders are familiar with the benefits of privatisation, only that it is easier said than done. Further, privatisation is just one of the means to promote growth. Thus, we anticipated with interest the comments following by the panel.

Mr Saccomanni began his commentary on the results of this study, saying that given the economic state Europe is at the moment, “anything can help” the EU. He praised the macro-economic effect of privatisation and referred to the privatisation of banking sector in Italy as a success story. Further, the former Italian Minister of Economy mentioned how his work with the Letta government had as primordial aim the privatisation of public companies in ‘Belpaese’. He also made the remark that even the Renzi government follows the same path. At least, the “infrastructure of the single market”, he argued, sectors like energy and digital industry, need to be privatised as much as possible for the EU to come back to growth fast.

The turn of Mrs Goulard, French liberal MEP of ALDE, came right after that and she stressed immediately how growth is desperately needed in Europe. Interestingly enough the French MEP discussed about the privatisation potential of France that on its own is not able to eradicate public debt. Mrs Goulard embraced the privatisation idea but at the same time she underlines that Europe lacks a panEuropean strategy and approach on this one. On the country, unilateral approach by member states cannot just do the trick.  The French politician argued that there is a lot of foreign investment to foster growth in the Old Continent, but would not be materialised if Europe is fragmented policy wise.

Last, but not least, Mr Birnbaum from the German energy company, E.ON, argued that the real growth issue should not be privatisation but instead efficiency. He referred to the example of his company that when it takes over a smaller company in the energy industry, then suddenly productivity gets better, as well as safety. He supports that utility industry can bear great advantages from privatisation. As he simply put it, “improvement of industry would not have happened with monopolies”. In a nutshell, for the German business man it is not necessarily privatisation but the mere pressure from the market that can clean an economy and enforce growth. That combined with fair regulation.

All in all, the takeaway from this event was rather positive. Emphasis on the benefits of privatisation is always relevant, especially in these times of economic fragility in Europe. However, it is known that privatisation is not panacea. It is certainly not the synonym of growth but only one means to obtain a growth orbit. Most importantly, most member states have privatisation in their agenda but in general do not see as ambitious results as per the plans preceding. Instead, estimating the impact of privatisation to public debt, as many of the panelists argued about last Monday, is a rather tricky and multifactorial exercise.

Last, if we accept that privatisation can release business in some sectors, create competition and hence growth in the long run, then what are the sectors or type of companies that need to remain public? Are we pro-privatisation for anything? Would we want to pay a price for water we drink or air that we breathe to private companies? And what are the dangers if ownership expands to areas that jeopardise harmony in societies?

All these are questions that we hope the next United Europe conference on privatisation will not neglect to address.

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