Liberalisation and privatisation in the EU. Services of general interest and the roles of the public sector

This monograph gives an overview of the privatisation process in services of general interest in Europe and its outcomes, elaborating in particular on its consequences for the European social model. In the first parts, the history of privatisation is discussed, including its timing, rationale and drivers. An overview of different types of privatisation is also given as well as of the accompanying processes. Then the publication looks in detail into the economic outcomes, especially in the context of the underlying assumptions which justified decisions to launch the privatisation processes. It finds that most of the positive effects expected did not materialise at all or were very minor. As regards the creation of competitive markets, for example, increased competition was only achieved in countries and sectors that had a state monopoly at the outset. On the other hand, when a number of regional or local monopolies existed, market concentration increased as larger companies bought up their smaller competitors.

Liberalisation and privatisation of public services also fundamentally challenged the traditional labour relations regime in the public sector, resulting in a two-tier system of stable bargaining structures within the incumbent firms, and decentralised and fragmented bargaining structures among new competitors, leading to lower employment standards. The advocates of shifting from public monopoly promised cheaper and better services, and that reduced prices would boost demand and create more jobs. However, the reality proved different, with rising atypical forms of employment and only minor productivity gains, driven mainly by lower labour input combined with other cost cutting strategies that led to a deterioration of employment and working conditions.

Liberalisation and privatisation have also had some positive, as well as negative, effects on service quality. Furthermore, the publication argues that these processes have had adverse effects on the European Social Model as they resulted in lower social cohesion in access to good-quality public services. The publication draws implications for public policy, focusing in particular on the key phases of the privatisation process, the market regulation processes which need to be in place and the impact of privatisation on employment, industrial relations, productivity and profitability, and service quality.