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The right to water and 7 challenges to the welfare state

by B Schusta, S Wixforth & S Pirklbauer
Visions need concrete, tangible measures that provide security in times of uncertainty and reliably carry all people through the huge changes. The sooner the challenges to the welfare state are recognized and addressed, the sooner the indispensable ecological transformation will also become a social one.
The right to water is a fundamental right for all
February 2, 2023
by Beate Schusta, Susanne Wixforth & Iris Strutzmann
[This article posted on 2/2/2023 is translated from the German on the Internet,]

The use of water as a resource by private companies has long been a source of debate within the EU. Although access to water has been considered a UN human right since 2010, the EU Commission proposed in 2011 to push ahead with the privatization of water supply. The European citizens' initiative "right2water" was able to stop the project. The new version of the Drinking Water Directive obliges EU member states for the first time to improve access to drinking water, especially for disadvantaged groups. Now the European Court of Justice is dealing with the question of whether the state may restrict the commercial use of drinking water. What may sound to some merely like the plot of "James Bond 007: Quantum of Solace" could become reality in the EU in the future.

Gold of the 21st century

In the past, there have been repeated attempts to privatize water at the EU level under the pretext of protecting the fundamental freedoms of the EU. The argument: the freedom to provide services and the freedom of establishment within the European internal market require unrestricted access to possible business activities, for example the use of drinking water sources for commercial exploitation of any kind - such as power generation or mineral water distribution. According to this logic, in order to provide companies with EU-wide access to markets, a public EU-wide tender is required. For this reason, the EU Commission wanted to subject the award of concessions for (waste) water supply to an EU-wide tender as early as 2014 with the so-called Concessions Directive, which regulates the award of construction or service concessions by the public sector. This plan was ultimately abandoned, not least because of the determined resistance of the citizens' initiative "right2water", which was co-founded by trade unions and the Federal Chamber of Labor.

In 2019, the issue of requiring public tendering for the use of water in connection with the generation of electricity by hydropower plants was taken up again. The occasion was the complaint filed with the EU Commission by an Italian power plant company that wanted to take action in Austria. From the company's point of view, it was contrary to the freedom of establishment that the previous power plant operator had the right to extend a water use permit. Instead, an (EU-wide) invitation to tender had to be issued for every water law permit or its extension. The EU Commission initiated investigations against eight member states to determine whether there had been a breach of contract. According to the EU Commission, the public and international invitation to tender for the use of hydropower is intended to ensure that the best bidder is awarded the contract and to prevent preferential treatment of national operators of hydropower plants. With the combined forces of the federal government, energy suppliers, trade unions and the Federal Chamber of Labor, this procedure was finally averted.

Mineral water is also water

But the groundhog says hello every day: No sooner has the EU Commission put the issue to bed than it is back on the agenda for legal discussion "through the grapevine". The increasingly scarce resource of water is too coveted and lucrative. Now the European Court of Justice (ECJ) is called upon: The Romanian state regularly grants exclusive licenses for the use of mineral water sources to a company that is wholly owned by the state. Romaqua SA, a private joint stock company also active in the mineral water sector, applied for a water concession in order to be able to use the mineral water source previously used by the state-owned company. This application was rejected by the competent authority. The company's complaint is directed against this. In its view, such an "in-house award", i.e. state utilization of the spring without a public tender, is contrary to EU law.

The Romanian Constitutional Court therefore referred two questions to the ECJ. Namely, whether, on the one hand, it was permissible for licenses for the exploitation of mineral water sources to be awarded directly - and not under competitive conditions - to a company wholly owned by the state through successive and unlimited extensions of exclusive licenses. And whether, on the other hand, such a practice constitutes an unjustified restriction of entrepreneurial freedom and freedom of establishment.

Two questions that are crucial for Austria's order of water management. Admittedly, there are no concessions in Austria comparable to the Romanian system - rather, private or commercial use of water requires a permit under water law. This also corresponds to the distribution of competences between the EU and its member states: Accordingly, the Member States themselves decide on their property regime, i.e. also on ownership and the rights of disposal concerning water. If, in the case in question, the ECJ were to come to the conclusion that an obligatory tender for the management of the resource water was nevertheless within the competence of the EU, this would be a gateway for the future commercialization of the supply of drinking water and would call into question the principles of public services of general interest, namely the availability of water for all at reasonable, affordable prices.

"Pipe bead" for mineral water companies or vital resource for survival?

The global drought in the summer of 2022 once again impressively demonstrated what was already known before: water is becoming increasingly scarce and thus more valuable due to the climate crisis. Even countries with a moderate climate such as Austria will not be spared from this development. In view of the climate crisis, water is thus increasingly becoming a contested commodity with which a lot of profit can potentially be made due to its scarcity. It is therefore all the more important that it is provided by the public sector in order to ensure the supply of drinking water to the population at affordable prices and through forward-looking planning and investment in its infrastructure. The prerequisite for this is that the resource water remains the property of the state and is managed by it. This is the only way to ensure that private companies do not exploit the strained supply situation for profit.

Where privatization projects have been implemented in the past in connection with water supply, they have not proven to be effective. Worldwide, there is a trend toward remunicipalization that can be explained by the failure of liberalization. There are many reasons for this:

increased prices and poorer supply by private companies,
unfulfilled investment promises or underinvestment by private companies,
disputes over operating costs and price increases, and related unaffordable water bills,
Difficulties in monitoring private company operations,
Employment reductions and poor service quality.

From these and similar experiences, it is clear that the liberalization path in areas of general interest services - from water to public transport to justice and penal systems - is a dead end. The state as a republic, i.e. as res publica, must retain these tasks in the interest of its citizens. Entrepreneurial freedom and freedom of establishment must be subordinated to the human right to water - and not vice versa. It is to be hoped that the European Court of Justice will rule in this sense.

Beate Schusta is a research assistant at AK Vienna and is conducting research on European competition law in the digital sector as part of her master's thesis at WU Vienna.
Susanne Wixforth is deputy head of department in the Economic Policy Department of AK Vienna.
Iris Strutzmann is a consultant in the Environment and Transport Department of AK Vienna.

7 challenges posed by the climate crisis to the welfare state

by Sybille Pirklbauer
[This article posted on 10/24/2022 is translated from the German on the Internet, Klimakrise und Sozialstaat - Arbeit&Wirtschaft Blog.]

It cannot be pointed out often enough that the climate crisis is not imminent, but already highly acute - and with massive implications for the welfare state. The resulting challenges are manifold and range from new health risks to the financing of the welfare state. The sooner these risks are factored in and measures are taken, the sooner it will be possible to turn the indispensable ecological transformation into a social one as well.

Even though the Austrian welfare state is well developed in many areas, there are already gaps and inadequacies. For example, many parts of the country still lack adequate provision of social services such as kindergartens, nursing care or opportunities for further education. Many benefits that are supposed to secure livelihoods, such as unemployment benefits or the minimum pension, do not adequately protect against poverty. Now new social risks are being added as a result of the climate crisis. Seven central challenges arise for the welfare state.

1 New health risks: Heat, allergies, new diseases

Increasingly hot summers and too few cold winters pose a whole new set of health risks. The temperature increase due to climate change in Austria is about twice as high as the average temperature increase worldwide. The increase in heat days (over 30 degrees) and tropical nights (over 20 degrees) is particularly stressful for children and the elderly, as well as those suffering from cardiovascular or other chronic diseases. In four of the last ten years, more people died in Austria from the effects of heat than from road traffic. Heat prolongs the allergy period, exacerbating respiratory diseases and causing the spread of non-native animal and plant species (e.g. tropical mosquito or ragweed), leading to the introduction of new diseases such as malaria. The health system must address these risks and provide care for those affected.

2. when gainful employment becomes impossible

Massive storms with heavy rain, storms and hail caused flooding and mudflows in Carinthia and Tyrol this summer, resulting in millions of euros in damage. Such extreme weather events will become more frequent in the future, with many negative consequences: Broken rail lines and roads make it impossible for those affected to get to their workplace - if the company or institution where the workplace is located is not also affected itself anyway. For people with care responsibilities, the loss of care infrastructure presents difficult challenges in continuing to do their jobs. The loss of residence also naturally means that those affected are preoccupied with acute challenges and are therefore massively restricted in their ability to pursue gainful employment.

But the increasingly frequent days of extreme heat also mean that work outdoors or in poorly insulated buildings and factory halls is unreasonable and a threat to health. Protection in the event of being (temporarily) prevented from gainful employment through no fault of one's own is supposed to be provided by labor and social legislation - but these are designed for regular operations and not for crisis situations. Many questions have already arisen in connection with the Corona pandemic, for example when companies had to close during lockdowns or kindergartens were closed due to high infection rates. It is important to draw on these experiences and further develop the responses.

3 Increased extreme weather - broken infrastructure

Storms are destroying infrastructure with increasing frequency. This affects roads and rail lines, private houses and apartments as well as office buildings, but also social infrastructure such as schools, kindergartens or hospitals. This raises not only the question of how to repair it as quickly as possible, but also how to maintain basic public services in the event of a crisis.

A key challenge will be to make the social infrastructure climate-crisis-proof. This includes, for example, insulating (and, if necessary, cooling) buildings in such a way that the people inside - especially children and the elderly and sick - are not put at risk to their health. Emergency logistics must be reviewed and adapted as necessary. For example, many hospitals have emergency generators in the basement - which endangers the power supply in the event of flooding.

Storms and their consequential damage also jeopardize the provision of mobile services, which are an essential pillar in nursing care in particular, but also doctors in private practice. Corresponding risk simulations and emergency plans on how health and nursing care can be maintained in the event of a crisis will be indispensable in the future.

4 Rising prices for housing, energy and food

Currently, the inflation crisis is driving up the cost of living massively. The effects of the climate crisis could exacerbate these developments: For example, crop failures caused by drought, heavy rain and pest infestations could contribute to more expensive food, rising insurance costs could lead to higher prices for housing, mainly due to storm damage, or energy could become more expensive because too little water could jeopardize the generation of electricity using hydropower and also nuclear power due to the lack of cooling. This hits particularly hard those who have to spend a large part of their income on basic living costs.

Even before the current enormously high inflation, more than half of the expenditure of the lowest fifth of income was accounted for by the three categories housing, energy and transport alone. Structural measures such as the expansion of public housing and a new, social rental law will be necessary to contain price increases in vital areas. There is also an urgent need to question whether a liberalized energy market is a model fit for the future. In any case, it will be important to focus more strongly on the provision of essential goods and services, such as basic energy security.

5 Upheavals in the labor market

The indispensable transformation of the economy toward climate neutrality will bring about upheavals for the entire economic structure, forcing many companies to fundamentally reorient themselves and transforming entire industries. This is accompanied by major upheavals in the labor market, causing old occupations to disappear and new ones to emerge. For those whose jobs are at stake, this is an existential threat.

At the same time, there will be a demand for new skills and the requirements in existing occupations will also change. Without massive publicly supported training programs, these upheavals will not be in the interest of either companies or employees. What is needed here is good social protection during the transitions and, at the same time, a clear legal entitlement to acquire new skills that are in demand, whereby companies themselves also bear responsibility for obtaining a sufficiently qualified workforce.

6 Old poverty meets new poverty

The welfare state makes an enormously important contribution to preventing poverty - but not without gaps. For example, even after the recently announced pension increase, the minimum pension ("Ausgleichszulage") is still below the poverty threshold of 1,378 euros a month (12 times a year), and even further below that is the minimum benefit or social assistance. Even among unemployed people, nine out of ten have a daily rate that does not reach the poverty threshold. For one-third of households, even before the pandemic, there was not enough money to cover necessary expenses.

The disruptions caused by the climate crisis will further worsen the social situation, especially for people with low incomes and poor social security. Benefits that are central to people's livelihoods must be raised to a poverty-proof level. The enormous increases in inflation also raise the question of whether the amounts paid out can really be used to cover the most necessary expenses. The concept of reference budgets offers an important approach here. In addition, the focus must also be on forms of poverty such as energy poverty or mobility poverty, and new solutions must be developed and implemented to ensure access to affordable energy and public mobility, for example.

7 Financing the welfare state

Last but not least, the climate crisis poses challenges to the financing of the welfare state. In addition to the points mentioned above, which require measures that also require corresponding financing, competition for the use of public funds will increase.

For example, demands will be placed on the public purse in repairing storm damage as well as through spending on prevention (e.g., protective structures, climate-proof infrastructure). At the same time, however, the threat of economic dislocation is leading to a reduction in revenue potential. And last but not least, there is a huge need for investments in climate protection - which, however, are not only without alternative against the background of the unaffordable consequential costs of a further escalating climate crisis, but also lead to savings in the short and medium term, for example through cheap renewable energy or the elimination of threatened compensation payments in the billions due to missed climate targets.

Prosperity: rethought and experienced

The most difficult task will be to redefine prosperity not only in philosophical concepts, but also in concrete tangible and experiential terms detached from consumption. Many are already working on this. The United Nations adopted a strategy for a "blueprint for peace and prosperity for people and the planet" with the Sustainable Development Goals 2015.

WU Vienna, in cooperation with a wide range of scientific and civil society organizations, organized congresses in 2015 and 2017 on how to achieve a "Good Life for All". Since 2018, the AK has produced the annual AK Prosperity Report, which uses five thematic areas to show that the sustainable development of prosperity and well-being goes far beyond economic growth. These concepts and discussions are all important contributions. But it will be crucial for people to experience for themselves that their lives are made better if they lose access to the city center by car (as large as possible), but gain a lively, green public space that can be used in a variety of ways.

But the visions need concrete, tangible measures that provide security in times of uncertainty and reliably carry all people through the huge changes. The sooner the challenges to the welfare state are recognized and addressed, the sooner the indispensable ecological transformation will also become a social one.

Sybille Pirklbauer is head of the social policy department of AK Vienna.
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