Protecting Transport from the EEC Treaty’s Liberalisation Bent

In the 1950s, the transport sector accounted for a fifth of the combined gross national product of the six original EEC countries and employed 16 per cent of the workers in the industrial sector (Lindberg and Scheingold, Reference Lindberg and Scheingold1970: 142). Because of this and explicit political commitments to social and regional cohesion, the question of transport was bedevilled by fierce debates between governments, their transport ministries, and the European Conference of Ministers of Transport (ECMT), established in 1953, whose ‘opinions counted as authoritative’ (Schot and Schipper, Reference Schot and Schipper2011: 283). A clear division emerged over whether transport should be treated as any other economic sector or whether its peculiarities, such as the public service aspect, should be addressed by emphasising cooperation over competition. Already there were concerns ‘that only a European authority would be able to close unprofitable railway lines because it alone could operate free from national public service considerations’ (Henrich-Franke, Reference Henrich-Franke2008: 67). The ECMT, on the other hand, ‘feared that transport integration would be misused for a political purpose, and that supranational European integration could lead to wasteful or ruinous competition’ (Patel and Schot, Reference Patel and Schot2011: 399).

The extent of these concerns was so grave and progress so slow that its drafters ‘faced the choice to delay the Treaties or to exclude transport’ (Schot and Schipper, Reference Schot and Schipper2011: 274). Neither option was considered acceptable. Thus, a separate Transport Title was included in the EEC Treaty that envisaged a common transport policy; however, there was ‘a great deal of disagreement over how such a policy would be constructed’ (Aspinwall, Reference Aspinwall1995: 480). Provisions were put in place to safeguard isolated inland modes of transport from its overall liberalising bent, and aviation was excluded altogether on national security grounds.Footnote ¹

Additional safeguards included the permissibility of state aid insofar as such subventions were for the ‘co-ordination of transport or if they represent reimbursement for the discharge of certain obligations inherent in the concept of a public service’ (emphasis added) (Art. 77 TEEC). Also, unanimity was required where transport was ‘liable to have a serious effect on the standard of living and on employment in certain areas and on the operation of transport facilities’ (Art. 75(3) TEEC). This provision protected the interests of transport users and workers in the sector and remained in force until the Lisbon Treaty. According to most member states, the separate Transport Title in the EEC Treaty protected the transport sector from the application of other Treaty articles governing such matters ‘as competition, state aids and the freedom to provide services’ (Stevens, Reference Stevens2004: 44). Despite the Commission’s enthusiasm for creating a common transport market (Commission, Memorandum, COM (61) 50 final; Tindemans, Reference Tindemans1976), the Council staunchly defended decommodified transport services. In the 1970s, the Council exempted, for instance, the question of transport from the first wave of procurement directives. Whereas EEC policymakers reached ‘almost magical compromises’ in the agricultural sector, which was also governed by a specific Treaty Title, there was an ‘almost total deadlock’ in the transport sector (Lindberg and Scheingold, Reference Lindberg and Scheingold1970: 163).

Towards the Commodification of Transport Services by EU Law

Following the first EU enlargement in 1973, liberalising transport became again a political issue. UK governments, along with Dutch ones, spearheaded the deregulatory drive but, with unanimity voting prevailing in the Council, their efforts were initially readily prevaricated. The application of neoliberal paradigms to transport, however, was also assisted by developments that originated outside Europe, namely, the deregulation of US aviation in the late 1970s (Kassim and Stevens, Reference Kassim and Stevens2010). Following this, the Commission, in the first half of the 1980s, published three reports on inland (1983), maritime (1984), and air (1985) transport with the objective of launching ‘an irreversible liberalisation process’ that ‘was intended to work like a snowball getting both larger and faster as it rolled down hill’ (Stevens, Reference Stevens2004: 57).

For the reasons cited, civil aviation and maritime transport were excluded from the EEC Treaty (and therefore fatefully also from the protections of its Transport Title) and were instead regulated by intergovernmental agreements. In an important European Court of Justice (ECJ) case, known as Nouvelles Frontières,Footnote ² inter-airline agreements were found to be illegal ‘in the absence of any Community regulation exempting them from the normal application of Treaty competition rules’ (Stevens, Reference Stevens2004: 58). This case was a ‘turning point for EU aviation’ (Kaeding, Reference Kaeding2007: 47), which received a further boost when the European Parliament, along with the Dutch government, brought the Council before the ECJ, which ruled that the Council had infringed the Treaty by failing to ensure freedom to provide services in the sphere of international transport.Footnote ³ Constituting a ‘watershed for supranational transport policy’ (Kerwer and Teutsch, Reference Kerwer, Teutsch and Windhoff-Héritier2001: 29), this ruling meant that the Council could no longer insist on harmonisation as a precondition to liberalisation (Erdmenger, Reference Erdmenger1983; Héritier, Reference Héritier1997). This emboldened the pro-commodification advocates reorganising themselves at European level (Jensen and Richardson, Reference Jensen and Richardson2004).

In 1985, the Commission (White Paper, COM (85) 310: 27) once again emphasised that transport was ‘of prime importance’ for the internal market and framed it as a normal economic activity without mentioning its role as a public service. That said, the rail sector was spared and considered as being ‘not of direct relevance to the internal market’ (White Paper, COM (85) 310: 30). Under the Single European Act, qualified majority voting was extended to many areas including aviation and maritime. This change ‘made it harder to resist the neoliberal agenda embedded in the Treaties’ (Stevens, Reference Stevens2004: 246), but not impossible. The successful adoption of three liberalisation packages between 1987 and 1992 created the single European aviation market. Buoyed by this, the EU turned its liberalisation sights on road haulage, rail, and other network industries (Chapter 7). The liberalisation of road haulage was contentious on the question of cabotage (the operation of non-resident hauliers in foreign markets); however, on account of the ‘weakened position of the anti-liberalization actors’ (Héritier, Reference Héritier1997: 541), agreement on a liberalisation package between member states was possible, formally at least (Schmidt, Reference Schmidt2002). Several member states, including Italy and Germany, regulated road haulage to protect their railways from intermodal competition. The latter proposed a road toll for trucks from other member states to protect its railways and contribute to road-building costs. This, at the behest of the Commission, was deemed illegal by the ECJ. Hence, railways were to be susceptible to competition from road haulage, thereby contributing to its liberalisation.

Regarding the question of rail liberalisation, Directive 91/440/EEC ‘is the most important Community measure to improve the competitiveness of rail transport’ and required the organisational separation of railway operations and infrastructure management (Commission, Communication (1998) 202/final). This separation is also important in the context of monetary union, a point we return to below. In the 1990s, EU rail legislation (e.g., the Directives 95/18/EC on licensing of railway undertakings or 95/19/EC on railway infrastructure capacity) constituted a false start, as it focused on ‘less demanding’ reforms (Knill and Lehmkuhl, Reference Knill and Lehmkuhl2002: 272) and was characterised by a high degree of ambiguity, which mirrored the resistance by governments, such as the French (Kerwer and Teutsch, Reference Kerwer, Teutsch and Windhoff-Héritier2001: 46), and by the state-owned railway companies, represented by the Community of European Railway and Infrastructure Companies (CER). To overcome that resistance, the Commission (White Paper, COM (96) 421) first favoured a ‘big bang’ liberalisation; but, once the Commission realised that support from the Council was not forthcoming, it adopted a more gradual approach (Dyrhauge, Reference Dyrhauge2013: 56). Hence, rail liberalisation really began in earnest only in the 2000s. By then however, the Amsterdam Treaty had enhanced the status of the European Parliament in EU transport policymaking. Subsequently, the Parliament became a co-legislator with the Council; this also meant becoming a target for both pro- and anti-commodification groups (see section 8.4).

Under their Lisbon growth agenda for the 2000s, EU leaders envisaged greater service liberalisation as well as the curbing of state aid (European Council, 2000: 20). The conservative Spanish EU Transport Commissioner Loyola de Palacio spearheaded this endeavour and sought to liberalise the rail sector, public transport, and port services, with mixed results. All three legislative attempts triggered countermovements by unions and other public sector advocates. Regarding railways, three packages of EU railway laws were agreed, between 2001 and 2007, with the emphasis placed first on rail freight given its role in the movement of goods and its lesser political standing in terms of public salience. The first package envisaged competition on Trans European Rail Freight Network routes from 2003 and for all international rail freight from 2008. The second package, adopted in 2004, accelerated the liberalisation of rail freight services by fully opening the rail freight market to competition as of January 2007. The third package, adopted in 2007, aimed to open international passenger transport to market mechanisms by 2010. We return to the rail acquis below, but first let us consider one of the most overlooked pieces of EU legislation for public transport (Finger and Messulam, Reference Finger, Messulam, Finger and Messulam2015: 4).

Public services obligations (PSOs) have been central to the state’s provision of public transport services and ‘can best be described as an activity carried out in the public interest, either directly by the authorities or by private undertakings under the control or supervision of the public authorities’ (Degli Abbati, Reference Degli Abbati1987: 21). Questions pertaining to state aid and competition come under the remit of the Commission’s DG Competition, which by the 2000s was no longer ‘a sleepy, ineffectual backwater of Community administration’ (Wilks and McGowan, Reference Wilks, McGowan, Wilks and Doern1996: 225).Footnote ⁴ Building on both the 2001 transport White Paper (COM (2001) 370) and the 2004 White Paper on services of general economic interest (COM (2004) 374), the Commission proposed a new Regulation that sought to streamline rules governing state aid by introducing compulsory competitive tendering in public transport. A protracted process ensued, involving three attempts by the Commission to have the regulation adopted. Following a landmark caseFootnote ⁵ on state aid in the public transport sector, the ECJ ruled that ‘where subsidies are regarded as compensation for the services provided by the recipient undertakings in order to discharge public service obligations, they do not constitute state aids’ (emphasis added) (Bovis, Reference Bovis2005: 572). This Altmark ruling, along with amendments introduced by the European Parliament and the Council, meant that PSO Regulation 1370/2007 allowed for the possibility both of direct award and of competitive tendering, that is, member-state discretion in the awarding of public contracts prevails. This was welcomed by pro-public services advocates, such as the European Transport Workers’ Federation (ETF) and several member states, as the adopted regulation differed from the Commission’s original market-oriented proposal (ETF, 2010).

Rail liberalisation followed the same logic as other network industry liberalisations, such as telecommunications and electricity (Chapter 7). This logic centres on privatisation, regulatory independence, unbundling, and competition (Florio, Reference Florio2013). EU legislators are limited by Art. 345 TFEU regarding privatisation (Akkermans and Ramaekers, Reference Akkermans and Ramaekers2010), but the dividing of services from infrastructure, that is, unbundling and fostering competition, overseen by an independent regulator, remain paramount to EU liberalisation, which can indirectly, but not unintentionally (Clifton, Comín, and Diaz Fuentes, Reference Clifton, Comín and Diaz2003), put pressure on governments to pursue (partial) privatisation. This gradual approach seeks to foster competition by establishing a regulatory framework that ensures that national governments stay at arm’s length. Here, the Commission, in relation to unbundling, has a clear and long-standing preference for vertical separation ‘as a more effective means to alleviate the infrastructure monopoly problem, ensure neutrality and allow new entrants on the market of train operations’ (van de Velde, Reference van de Velde, Finger and Messulam2015: 53). However, alternative governance structures also exist (Dyrhauge, Reference Dyrhauge2013: 42–50).

The three rail liberalisation packages sought to restrict state interference by promoting vertical separation, which concretely involves (1) splitting up the state-owned railway company into separate passenger and freight units; (2) establishing an infrastructure manager to oversee non-discriminatory charging and the granting of access to the rail network, based on an economic rationale rather than social needs; and (3) creating an independent rail regulator ‘to whom applicants can appeal if they consider that the rules have not been applied fairly’ (Stevens, Reference Stevens2004: 99). The Commission depends on disgruntled private enterprises taking anti-competition cases (Kelemen, Reference Kelemen2011) to ensure liberalisation. However, cases taken by private rail companies challenging state-owned rail companies’ (alleged) abuse of position have not materialised.

Following the Swedish and British national liberalisation processes, the Commission pushed for vertical separation. Each of its three legislative liberalisation packages ended in conciliation between the European Parliament and Council (Dyrhauge, Reference Dyrhauge2013: 88). In the legislative process, vertical separation was resisted by key member states, notably Germany and Italy, ensuring a degree of heterogeneity. In 2010, the Commission nonetheless filed actions against thirteen member states, including GermanyFootnote ⁶ and Italy,Footnote ⁷ for having allegedly breached the first railway package. Most member states undertook only a minimum separation, thereby allowing the preservation of national rail holding groups, such as Deutsche Bahn. The Commission argued that the rail acquis means that the infrastructure manager, such as Deutsche Bahn Netz, cannot form part of a holding company that also comprises the railway undertakings. In other words, holding companies, such as Deutsche Bahn, were problematic. In addition, the Commission was critical of the fact that the German and the Italian infrastructure operator’s independence was not supervised by an independent agency. Following the opinion of Advocate General Niilo Jääskinen, the Court of Justice of the EU (CJEU) rejected the Commission’s complaint regarding Germany and Italy. Moreover, the Court noted that the rail acquis requires only legal and accounting separation, which are present in the holding company model (Rail Gazette, 7 September 2012). Despite evidence to the contrary (van de Velde, Reference van de Velde, Finger and Messulam2015), the neoliberal Estonian EU Transport Commissioner Siim Kallas said after the ruling that the Commission ‘remains convinced that a more effective separation between an infrastructure manager and other rail operations is essential to ensure non-discriminatory access for all operators to the rail tracks’ (emphasis added) (Politico.eu, 28 February 2013).

Another key development in EU transport governance is the Lisbon Treaty (Schweitzer, Reference Schweitzer and Cremona2011: 52), which abolished the unanimity requirement in the Council for transport sector-specific laws that ‘might seriously affect the standard of living and level of employment in certain regions’ (Art. 75(3) TEEC). When adopting EU laws in the field, EU legislators are henceforth tasked only to consider the following: ‘account shall be taken of cases where their application might seriously affect the standard of living and level of employment in certain regions, and the operation of transport facilities’ (emphasis added) (Art. 91(2) TFEU). In other words, a significant institutional safeguard that protected the initial social purpose of European transport service governance was finally removed. Whereas the Commission’s (MEMO/09/531) corresponding explanatory memo simply failed to mention it, trade unionists overlooked this change in the Lisbon Treaty debates (Béthoux, Erne, and Golden, Reference Béthoux, Erne and Golden2018). This modification was still very much welcomed by pro-commodification advocates, as it facilitated the adoption of new EU laws in the field, which we assess at the end of the post-financial crisis developments section below. Before turning to the EU’s response to the 2008 crisis and its implications for public transport services, we must assess a precursor to the NEG regime that is bound up in economic and monetary union (EMU). We briefly consider this next.

EMU and the Commodification of Public Transport Services

The EMU accession criteria involved a forensic surveillance process resulting in a strong conditioning effect on state–market relations, especially on public transport infrastructure (Savage, Reference Savage2005). To join the eurozone, national governments had, among other things, to have a public deficit of less than 3 per cent of GDP. Albeit indirect, pressures arising from the EMU criteria were particularly relevant for the rail sector, which ‘had become a growing burden on the public finances’ (Finger and Messulam, Reference Finger, Messulam, Finger and Messulam2015: 1). In addition to liberalisation, EU rail legislation accordingly sought ‘to reduce railway debt to a level that does not impede sound financial management’ (Commission, COM (1998) 202 final: 2). Here, member states devised novel ways to manage public debt, which included reforming the transport sector. For some member states, reforms constituted a significant reversal of the entire post-World War II policy paradigm (Clifton, Comín, and Diaz Fuentes, Reference Clifton, Comín and Diaz2003). Italy, for example, topped the OECD privatisation ranking between 1995 and 1999 (Savage, Reference Savage2005: 129). These initiatives, all in the name of meeting the EMU criteria, were complemented by a hiring freeze, hospital closures (see Chapter 10), and reduced rail subsidies.

In this context, the Commission promoted three interrelated measures of immediate relevance for public transport services and their gradual commodification. The first has already been mentioned above in terms of establishing an environment for competition, namely, the separation of infrastructure managers from incumbent rail companies so as ‘to prevent state subsidies for public service obligations being used to finance commercial activities’ (Dyrhauge, Reference Dyrhauge2013: 85–86). Secondly, there was the creation of independent regulatory agencies, and once again there was a fiscal aspect. For instance, in the rail sector, regulatory agencies were envisaged as operating not only to ‘prevent conflict of interests’ and enhance competition but equally importantly ‘to reduce its reliance on public financing’ (Dyrhauge, Reference Dyrhauge2013: 54). Thirdly, there was the question of EU cohesion funds, which went towards the construction of infrastructural projects. Although often portrayed as a side-payment to the EU’s periphery in exchange for EMU (Hooghe and Marks, Reference Hooghe and Marks2001), the cohesion funds were ‘anything but a value-free pursuit’ (Nanetti, Reference Nanetti and Hooghe1996: 60). Rather, they were a vehicle for ‘stimulating the mobilisation of domestic private capital and attracting private capital from outside the country’ (1996: 66). This was achieved by public–private partnership (PPP), which can ‘dramatically improve the deficit position of member states’ (Savage, Reference Savage2005: 149).

The question of excessive deficits never really went away; however, EU executives lacked the teeth to deal with member states in troubled fiscal waters in the first half of the 2000s (Heipertz and Verdun, Reference Heipertz and Verdun2010). Following the 2008 crisis, EU leaders remedied this weakness through the adoption of the NEG regime (Chapter 2). From the above, it is clear that the liberalisation of rail and local public transport has faced numerous obstacles, including diverging member-state preferences and counter-mobilisations (see section 8.4). On rail liberalisation, Helene Dyrhauge (Reference Dyrhauge2013: 160) writes that ‘EU railway market opening is not a highspeed train which is quickly reaching its destination … instead it is a slow regional train stopping at all stations’. Such ‘stations’ include a general transposition deficit (Kaeding, Reference Kaeding2007), a lack of infringement proceedings by private litigants against incumbents, failed infringement proceedings by the Commission, and consequently persistent regulatory heterogeneity regarding both the degree of independence of the regulator and the degree of vertical separation. Might the NEG regime provide the Commission and national finance ministries with a new avenue whereby awkward national transport ministries, the European Parliament, a not always reliable CJEU, and recalcitrant transport unions can be circumvented?

Prescriptions on the Provision of Services

Resource levels: This section speaks to NEG’s quantitative dimension and to the question of commodification and decommodification. From Table 8.2 we can see that on the right, commodification side of it there is a singular, but repeated, resource-level-related commodifying prescription, which tasked the Romanian government to ‘identify and close … lowest cost recovery segments of the railway lines’ (P-MoU, Romania, 29 June 2011: 12). Subsequently, around 1,200 km of line were closed or leased out (European Commission, 2013: 51). The upshot of this was to restrict users’ access to (rural) transport services either because of cessation of the service or via an increase in prices, which were implemented (European Commission, 2014a: 17). In essence, their closure put important public services and goods beyond even commodification, all in the name of cost reduction. In 2015, the Commission nevertheless lamented that some ‘unsustainable railway lines are still not closed’ (Commission, Country Report Romania SWD (2015) 42: 27). Hence, Romania’s line closures represent ‘a real cautionary showcase’ (Global Railway Review, 24 September 2015) that unwittingly contradicted the enhanced role for rail laid out in the EU’s 2011 White Paper on transport.

After the 2008 financial crisis, the Irish Government also cut its capital expenditure on public transport, from €900m in 2008 to a low point of €254m in 2012, and its current expenditures from €343m in 2008 to a low point of €236m in 2015 (Hynes and Malone, Reference Hynes and Malone2020). These cuts, however, were triggered not by explicit, transport-related NEG prescriptions but by the intersectoral NEG prescriptions on public expenditure cuts and the Irish government’s turn to austerity that predated the arrival of the Troika (see Chapter 7). The Italian and German governments equally curtailed their public spending on transport to such an extent that EU executives in turn felt obliged to later issue countervailing prescriptions.

Looking at the left side of Table 8.2, we see that all countries under study also received prescriptions on resource levels that pointed in a decommodifying direction. Between 2012 and 2019, EU executives repeatedly tasked governments to increase or prioritise public investment in transport. For instance, the German government received an NEG prescription to ‘achieve a sustained upward trend in public investment, especially in infrastructure’ (Council Recommendation Germany 2016/C299/05) on account of Germany’s ‘sound fiscal position overall’ (Commission, SWD (2014) 406 final: 3). Despite federal spending on transport infrastructure having increased from an average of around €10bn annually over the period 2010–2014 to €12.3bn in 2016, EU executives stated that this ‘still falls short to meet the additional annual public investment requirement’ (Commission, Country Report Germany SWD (2016) 75: 46). Here, it needs to be borne in mind that Germany’s enduring underinvestment in transport preceded the debt break, enacted in its federal constitution in 2009, and German finance ministers’ proclaimed goal of a Schwarze Null: ‘black zero’. Consequently, ‘spending on public infrastructure has been on a downward trend for a long time’ (emphasis added) (Commission, SWD (2014) 406 final: 7), with ‘transport infrastructure’ being ‘affected in particular’ (2014: 9). The upward investment is seen as necessary to ‘maintain and modernise Germany’s public infrastructure’ (2014: 9), which is ‘crumbling’ (Economist, 17 June 2017).

Ireland too received transport-related decommodifying prescriptions on an annual basis between 2016 and 2019, but the gist of these prescriptions differed from those issued to Germany. The NEG prescriptions issued to the Irish government were: ‘Enhance the quality of expenditure … by prioritising … public infrastructure, in particular transport’ (emphasis added) (Council Recommendation Ireland 2016/C 299/16) and better ‘target government expenditure, by prioritising public investment in transport’ (emphasis added) (Council Recommendation Ireland 2016/C 299/16; Council Recommendation Germany 2017/C 261/07). As these decommodifying prescriptions tasked the government to divert public money away from other public sectors towards maintaining and upgrading public transport infrastructure however, they were still speaking to the austerity doctrine of doing more with less (Hermann, Reference Hermann2021). After the continued deterioration in the financial positions of Ireland’s transport providers triggered waves of strike action in 2016 and 2017 at Luas, Bus Éireann, and Iarnród Éireann, respectively (Palcic and Reeves, Reference Palcic and Reeves2018; Maccarrone, Erne, and Regan, Reference Maccarrone, Erne, Regan, Müller, Vandaele and Waddington2019), the government at last increased its spending on public transport once again. Since then, capital investment rose to €496m and current spending to €302m in 2019 (Hynes and Malone, Reference Hynes and Malone2020).

In 2019, all four countries received a transport-oriented decommodifying prescription. These came in the wake of the Italian Morandi Bridge disaster in August 2018, which killed 43 people and left 600 people homeless. A symbol of Italy’s miracolo economico, the Morandi bridge had been privatised in the late 1990s along with 4,000 miles of toll roads in the context of satisfying the Maastricht public deficit criteria (New York Times, 5 March 2019). The prescription urged the Italian government to focus on ‘the quality of infrastructure’ (Council Recommendation Italy 2019/C 301/12). Consequently, EU executives granted Italy an allowance of €1bn to secure its infrastructure, as the ‘state of repair is a clear source of concern’ (Commission, Country Report Italy SDW (2019) 1011: 52). The ailing state of transport infrastructure also informed the corresponding prescriptions for the other three countries. Furthermore, the 2019 prescriptions on public investments in transport infrastructure were linked semantically to another emerging policy script, namely, the looming climate emergency and the transition to a greener economy (von der Leyen, Reference von der Leyen2019). As seen above however, these concerns had hardly been a priority in the preceding years.

Sector-level governance mechanisms: Prescriptions under this category are the most prevalent, recurring in tranches across Germany, Italy, and Romania. This prevalence arises because EU public sector liberalisation occurred primarily at sectoral level (Héritier, Reference Héritier1997; Schmidt, Reference Schmidt2002; Smith, Reference Smith2005: Leiren, Reference Leiren2015). At the same time, liberalisation attempts were limited, as EU legislators were able to prescribe only new regulatory frameworks that sought to foster competitive dynamics by gradually removing the exclusive rights of public operators (Florio, Reference Florio2013). Thus far however, the power of the supranational, regulatory governance agencies that have emerged in the transport sector is very limited.Footnote ⁸ Hence, the governance of the sector, namely, in rail and local public transport, still resides predominately with member states. This has produced mixed results with regard to the independence of transport governance from partisan, democratic governments – hence, the focus of NEG prescriptions on public transport governance across three of the four countries under study.

Romania received numerous prescriptions on the sectoral governance of rail. For instance, EU executives tasked the Romanian government to ‘pursue the restructuring of the Ministry of Transport’ (MoU, Romania, 23 June 2009: 5), with similar prescriptions returning in follow-up (supplementary) agreements (MoU, Romania, 1st addendum, 22 February 2010; MoU, Romania, 2nd addendum, 20 July 2010: 8; P-MoU, Romania, 29 June 2011: 12). Additionally, ‘a strong and independent regulatory body for the railway sector’ (P-MoU, Romania, 29 June 2011: 12) was envisaged. Another prescription insists that ‘the regulator has the necessary powers to request data and to take independent decisions on infrastructure charges’ (MoU, Romania, 2nd supplemental, 22 June 2012: 32).

Similarly, EU executives tasked the Italian government to set up ‘the Transport Authority as a priority’ (emphasis added) (Council Recommendation Italy 2013/C 217/11, see also Council Recommendation Italy 2014/C 247/11). Following these prescriptions, national legislators established new transport authorities in Italy (Autorità di Regolazione dei Trasporti) and Romania (Autoritatea pentru Reformă Feroviară), which became operational in 2016. By contrast, the NTA set up by Irish legislators in 2009 had begun operating in 2011; this explains the absence of corresponding NEG prescriptions for Ireland.

The primary objective of these agencies is to ensure competitive neutrality in the transport sector and to bring about organisational change and cost-cutting in state-owned operators so that they behave like private companies. Increasing the power of the infrastructure manager must also be seen as part of the vertical separation between the state-owned rail company and the management of the state-owned infrastructure. Interestingly, the objective was to ‘end political interference in tariff setting and to allow the rail infrastructure company (CFR Infrastructura) to independently determine rail track access charges’ (European Commission, 2013: 51). A euphemism for preventing practices of corruption, the prescription implies that fully liberalised sectors are free of such meddlesome sins, but as Helene Dyrhauge (Reference Dyrhauge2013: 111–112) showed, such processes can be ‘precarious … even when there is no state-owned incumbent’ (see also Crouch, Reference Crouch2016).

Despite the existence of a regulatory agency for network industries, EU executives told the German authorities to ‘strengthen the supervisory role of the Federal Network Agency in the rail sector’ (Council Recommendation Germany 2011/C 212/03). For some time, the EU had been deeply suspicious of the German integrated governance structure in the rail sector and the power of the German incumbent, Deutsche Bahn, to thwart competition and maintain its almost 90 per cent market share in passenger services and almost 80 per cent of the freight market (Dyrhauge, Reference Dyrhauge2013: 45–50). In 2013, 2014, and 2015, NEG prescriptions thus tasked the German government to ‘take further measures to eliminate the remaining barriers to competition in the railway markets’ (Council Recommendations Germany 2013/C 217/09; 2014/C 247/05) generally, and in ‘long-distance rail passenger transport’ in particular (Council Recommendation Germany 2015/C 271/01).

There were also several prescriptions on the subject of PSOs and competitive tendering. The prescriptions that targeted Romania urged its government to ‘continue competitive tendering in the public service obligation contract’ (P-MoU, Romania, 29 June 2011: 12) and to ‘improve the efficiency of public procurement’ (Council Recommendation Romania 2019/C 301/23). The prescriptions for Italy directed its government to promote competition in local public transport services through ‘the use of public procurement … instead of direct concessions’ (Council Recommendation Italy 2013/C 217/11). Uncoincidentally, most of the public transport service contracts between the incumbent stated-owned operator (Ferrovie dello Stato) and Italy’s regional governments expired at the end of the following year. Similar prescriptions were repeatedly issued to the Italian government in 2015 and 2016. The latter was more explicit and stated: ‘take further action to increase competition in … transport … and … the system of concessions’ (Council Recommendation Italy 2016/C 299/01). In 2011, an Italian law that imposed compulsory competitive tendering for all local utilities was repealed through a popular abrogative referendum initiated by the Italian water movement, unions, and other public sector advocates (see Chapter 9). Even so, the EU continued to push its commodifying agenda in the field by repeatedly advocating the adoption of a controversial, national competition law (2015, 2017, 2018, 2019). As most Italian legislators remained confident that EU executives would not dare fine Italy for non-compliance, they resisted implementing the prescription. On 2 August 2022 however, the Italian Parliament adopted the Annual Law No. 118/2022 on Market and Competition as requested, after the EU made its post-Covid resilience and recovery funding conditional upon the execution of its NEG prescriptions, as discussed in Chapter 13.

On the surface, some sector-level governance prescriptions seemed rather innocuous, but on closer inspection a different story emerged. For instance, the Romanian government was urged to adopt ‘a comprehensive long-term transport plan’ and ‘implement’ it (MoU, Romania, 2012: 32; Council Recommendation Romania 2016/C 299/18). Although this might appear to be a perfectly understandable request, it was private capital that benefitted immediately, with US consulting company AECOM, ‘the world’s premier infrastructure firm’, being awarded the €2.2m contract to develop the masterplan (Railway Gazette, 20 April 2012). More ominously however, the adoption of the master plan was ‘an ex-ante conditionality for EU funding of transport infrastructure in Romania during the 2014–20 EU funds programming period’ (European Commission, 2015b: 33). Hence, EU executives used the cohesion funds as a carrot to further a commodification agenda according to Common Provisions Regulation 1303/2013 (Chapter 2) – prefiguring the conditionalities attached to the EU’s post-Covid resilience and recovery funding (Chapter 12). It was by no means a coincidence that such enticement came at a time when the degree of coercion of NEG prescriptions for Romania had significantly diminished, as Romania was no longer involved in any very significant or significant NEG enforcement procedure. Hence, EU executives deployed other mechanisms to ensure compliance, using Romania’s dependence on EU structural and investment funding.

Provider-level governance mechanisms: The clearest form of commodification in the provider-level governance mechanisms category is privatisation. To this end, the MoU of 2010 tasked the Romanian government to take concrete steps towards the privatisation of CFR Marfă (MoU, Romania, 2nd addendum, 20 July 2010: 8), the state-owned rail freight company. The Romanian government in turn put up CFR Marfă for sale, but its privatisation collapsed in 2013 after the winning bidder, Grup Feroviar Roman, pulled out of the deal. EU executives nonetheless largely succeeded in turning freight transport into a private affair, as the opening of the sector to competition from private rail and road operators reduced CFR Marfă’s market share to less than 20 per cent (ADZ.ro, 7 July 2021).

As documented in Chapter 7, EU executives tasked Italy to ‘swiftly and thoroughly implement the privatisation programme’ (Council Recommendation Italy 2015/C 272/16). Although this prescription did not mention Trenitalia’s parent company, Ferrovie dello Stato, explicitly, the intended target became clear shortly afterwards when the Italian government announced its plan to sell up to 40 per cent of the company (Financial Times, 18 November 2015). This proposal, however, provoked mayhem, not only within its workforce but also within its senior management, and led to the resignation of the entire company board, as its members could not agree on how to privatise the railway, thereby stalling the government’s privatisation plans. This, however, did not prevent Italy’s state-owned railway company – like its German (DB) and French (SNCF) counterparts – from buying up privatised rail companies elsewhere in the EU (Gevaers et al., Reference Gevaers, Maes, Van de Voorde, Vanelslander, Finger and Messulam2015).

Other than privatisations, NEG prescriptions promoted the corporatisation of state-owned rail operators. EU executives tasked the Romanian railway management company, CFR Infrastructura, ‘to complete the present business plan with market-oriented information’ (MoU, Romania, MoU, 2nd supplemental, 22 June 2012: 32; P-MoU, Romania, 29 June 2011: 12). The following year, 2013, they tasked the Romanian government to continue their ‘corporate governance reform of state-owned enterprises’ in the ‘transport sector’ (Council Recommendation Romania 2013/C 217/17). With progress being too slow and ‘insufficient’ (European Commission, 2014b: 4), EU executives urged the government yet again to accelerate the corporate governance reform of state‐owned enterprises in the ‘transport sectors and increase their efficiency’ (Council Recommendation Romania 2014/C 247/21). As outlined above, increasing efficiency meant reducing costs through either labour shedding or line closures, both of which negatively affected the quality of public services. Even so, the NEG prescriptions echoed this approach in 2016 and 2019.

The 2016 prescription for the Italian government tasked it to implement ‘all necessary legislative decrees’, namely, those ‘reforming publicly-owned enterprises’ local public services’ (Council Recommendation Italy 2016/C 299/01). The latter included local public transport companies, whose ‘inefficiency’ was identified as being ‘particularly critical’ (European Commission, 2015a: 57). Unsurprisingly, publicly-owned (local) enterprises were targeted again by NEG prescriptions in 2019. In response, the Italian government introduced a new legislative framework that ‘aims to regulate systematically state-owned enterprises in line with the principles of efficient management, protection of competition and the need to reduce public expenditure’ (Commission, Country Report Italy SWD (2016) 81: 66). Furthermore, the government of Prime Minister Renzi announced that the number of publicly owned enti locali would be significantly reduced from 8,000 to 1,000 (Il Foglio, 13 January 2016). As the national government tasked its regions with the regulation of its local public transport and water services, different regional governance patterns emerged (Di Giulio and Galanti, Reference Di Giulio and Galanti2015). Nonetheless, even the centre-left government of Tuscany, once a heartland of Italian communism, awarded the operation of all public transportation services in the region in a single bundle to the French RATP Group ‘with subsidies amounting to €4bn’ (2015: 9). This put Tuscany’s municipal public transport providers (e.g., the Azienda Trasporti dell’Area Fiorentina: ATAF) out of business.

Prescriptions on Users’ Access to Services

As outlined above, several NEG prescriptions explicitly targeted the provisions of transport services. By contrast to those on water (Chapter 9) or healthcare services (Chapter 10), EU executives did not issue any NEG prescription that targeted primarily users’ access to public transport services, either on cost-coverage mechanisms (user charges) or on coverage levels (scope) of public services. That said, the constraints caused by the general NEG prescriptions on the curtailment of public spending (Chapter 7) or on the closure of unprofitable lines (discussed above) did affect users’ access to public transport services, albeit indirectly. Take Ireland for example. The Irish government radically reduced its subsidies for public transport providers. In the case of Dublin Bus, its public service obligation subsidy decreased from an already comparatively low figure of 29 per cent in 2009 to 20 per cent in 2015 (Unite, 2016), resulting in substantial ticket price increases (Irish Times, 19 October 2018).

NEG: Commodifying Public Transport Services by New Means

In sum, the transport sector was the subject of numerous NEG prescriptions. Most of them were qualitative in character and all of those went in a commodifying policy direction. By contrast, there was a dearth of quantitative prescriptions on the curtailment of spending on public transport services, save that issued in the singular to Romania in 2011/2. This finding is hardly surprising however, as the curtailment of public expenditure usually occurs at intersectoral level (Chapter 7). The exception here is healthcare, which constitutes a significant chunk of government expenditure (Chapter 10). There were also some quantitative prescriptions relating to resources, which pointed in a decommodifying direction. This suggests that some prescriptions were motivated by an alternative policy rationale, which does not fit the dominant commodification policy script that informs all qualitative NEG prescriptions on transport services issued across all countries from 2009 to 2019. We come back to this in this chapter’s conclusion. Before that, however, we discuss EU executives’ qualitative NEG prescriptions on transport services, which are striking as they repeatedly went beyond the acquis of EU law in the field, most explicitly by pushing a privatisation agenda.

Sector-level governance as a category featured most regularly, and these prescriptions chimed with the evolving rail acquis, which has been slow and tortuous. In a sector bedevilled by transposition deficits, regulatory heterogeneity, and (unsuccessful) infringement proceedings (section 8.2), the shift to the NEG regime provided EU executives with an opportunity to put the creation of the European rail market back on track. Sector-level prescriptions included enhanced independence for the regulator and the infrastructure manager from the publicly owned rail company and the national government; this technocratic fix is synonymous with ending political interference. For it to succeed, partisan, democratic decision making must be portrayed ‘as slow, corrupt, and ultimately irrational’ (Radaelli, Reference Radaelli1999: 47).

For the Commission, the German rail market is critical with regard to creating the single European rail market, as this ‘has an impact on the whole European railway system, given Germany’s central geographical position’ (Council Recommendation Germany 2012/C 219/10: Recital 15). However, the Commission remained frustrated with the lack of competition in German rail and rather suspicious of its governance structure, not least regarding financial transparency and cross-subsidisation. Deutsche Bahn has an integrated governance structure, which the Commission considered an obstacle to competition. Pursuing a parallel two-pronged approach vis-à-vis Germany, EU executives repeatedly issued prescriptions for the elimination of barriers to rail competition, with the Commission on a constant basis lamenting the lack of ‘progress in removing the remaining barriers to competition in the railway markets’ and identifying the ‘existing legal framework’ as ‘impeding competition’ (Commission, Country Report Germany SWD (2017) 71: 48). The Commission’s regular misgivings reflect the weak coercive power that the German NEG prescriptions were having. For this reason, the Commission was obliged also to continue making use of its traditional governance powers by law and through court proceedings, as outlined in the next subsection. Even so, the clearly commodifying bent of the NEG prescriptions issued to Germany on the provision of transport services is remarkable, as it confirms the existence of an overcharging commodifying policy agenda targeting all countries, irrespective of their location in NEG’s policy enforcement regime.

Romania and Italy, on the other hand, not only received prescriptions that went deeper than sectoral level governance but were also obliged to take them much more seriously. Both countries created independent transport authorities with substantial regulatory powers to further the liberalisation process. Ireland would have been obliged to take such prescriptions seriously, given its location in NEG’s policy enforcement regime. However, there was no need for them as Irish legislators had already set up the NTA in 2009.

EU executives also tasked the Romanian government to enhance the regulatory powers of the independent infrastructure agency in relation to its charges to railway, metro, or tram companies for their use of the rail network. Infrastructure charges are one resource, along with state subsidies, to finance rail infrastructure but have been ‘the subject of serious political and economic debates and decisions since the very origin of railways’ (emphasis added) (Messulam and Finger, Reference Messulam, Finger, Finger and Messulam2015: 323). More importantly, they remain ‘one of the main barriers’ to implementing commodifying rail reforms in Europe (2015: 325). The drafters of Directives 95/19/EC and 2001/14/EC tried to resolve the rail access charge issue, but the final directives ‘failed to deliver’ (2015: 325). To this end, the EU’s shift to the NEG regime provided EU pro-market actors with an opportunity to resolve this question in their favour. Whereas the European Parliament and the Council of transport ministers had been able to curb the commodifying bent of the Commission’s earlier universal legislative proposals in the field, typically in response to transnational strikes and demonstrations triggered by the Commission’s proposals (see below), their country-specific NEG prescriptions enabled the Commission and Council of finance ministers to pursue a commodification agenda that went beyond the transport acquis.

In sum, the shift to the NEG regime enabled EU executives to cajole reluctant member states – particularly those subject to constraining prescriptions – into accepting the Commission’s preferences, which EU legislators often watered down in the ordinary legislative procedures pertaining to transport laws. It is unequivocal that NEG prescriptions pursued the Commission’s long-standing commodifying policy preferences, namely, vertical separation in rail, regulatory independence, tendering for PSOs in transport services rather than direct concessions, and increased competition between transport providers. In other words, NEG provided EU executives with a new avenue to commodify transport services. Where NEG prescriptions’ coercive power was weak or began to wane however, EU executives continued to use the ordinary EU legislative procedures by law to advance their objectives.

EU Laws on Transport Services after the Shift to NEG

After most member states exited the corrective arms of the NEG regime, EU executives began to use another power resource to enforce their country-specific prescriptions, namely, the ex ante conditionality of EU cohesion funding (Chapter 2). This was the case in Romania, where EU executives used the carrot of EU cohesion payments (rather than the stick of financial sanction) to further their policy agenda in the transport sector. This enforcement power resource, however, works only for countries that depend on EU cohesion funding. Although EU executives also tasked the German government to reform the existing governance framework for public transport to increase competition, the weak constraining power of NEG prescriptions in this case meant that Germany could largely ignore them. To advance its policy objectives, the Commission therefore continued to use its ordinary legislative powers as initiators of EU laws as well as its legal powers in state aid and infringement proceedings.

In 2011, the Commission released another White Paper on transport (COM (2011) 144 final), which set the making of a true internal market for rail services as a priority. To that end, it proposed the structural separation between infrastructure management and service and the mandatory award of public service contracts under competitive tendering for public passenger transport. Already in 2010, the Commission had proposed replacing Directive 91/440/EEC with a recast directive, which sought to ‘avoid distortion of competition and preferential treatment of the incumbent’ by strengthening the independence of regulatory bodies from partisan politics and in particular the transport ministry (Dyrhauge, Reference Dyrhauge2013: 86). Importantly however, the final Recast Single European Railway Directive (2012/34/EU) of the European Parliament and Council ‘did not require organisational separation, thus complete vertical separation was not necessary’ (Dyrhauge, Reference Dyrhauge2013: 86). Despite this setback, the Commission continued to pursue its commodifying objectives, not only through NEG prescriptions but also by proposing a fourth package of EU railway laws.

The 2016 fourth railway package is the Commission’s most ambitious to date, as it aimed to introduce vertical separation and competition in the passenger market, including rail services under PSOs. Regarding governance structure, a blocking Council minority of national transport ministers (including Austria, Germany, Italy, and France) resisted vertical separation along with Community of European Railways (CER) and European transport workers’ unions (Scordamaglia and Katsarova, Reference Scordamaglia and Katsarova2016). The CER (2011) argued that a one-size-fits-all model for all countries would be unrealistic given the variation between them in structural characteristics. In addition, competition would work no better with vertical separation than with a holding company. The final package adopted by the Parliament and Council thus allowed for vertically integrated rail companies but introduced Chinese walls to restrict financial flows between the infrastructure manager and the rail operator in the overarching holding company. According to the package’s Compliance Verification Clause, the Commission can prevent rail companies that are part of a vertically integrated structure from operating in other member states if fair competition in their home market is not possible.

The ETF (2014) feared that cherry-picking lucrative contracts would lead to the neglect of less profitable rail routes and argued that direct award should remain the member states’ prerogative. To this end, the ETF (2014) petitioned members of the European Parliament (MEPs) and transport ministers to curb the Commission’s enthusiasm for competitive tendering by respecting the freedom of choice guaranteed under the PSO Regulation (1370/2007) discussed in section 8.2. Regarding the outcome, the ETF was pleased that governments had not accepted the Commission’s ‘dogmatic’ approach (ETF, 2015a), although concerns about social and employment conditions remained. The legislative amendments of the European Parliament and the Council of transport ministers to the fourth railway package somewhat curbed the commodification bent of the Commission’s initial legislative proposal, but this prevented neither the Commission and the Council of finance ministers from issuing NEG prescriptions that went further than the EU’s legal acquis (as discussed above), nor the Commission from using its significant powers as an enforcer of EU law to advance its aims.

In March 2011, the Commission conducted dawn raids on Deutsche Bahn offices. However, the latter brought a case to the CJEU, which deemed the Commission’s actions to be illegal.Footnote ⁹ It was against this backdrop that the Commission proposed its fourth package of EU railway laws. As mentioned above however, a Franco–German alliance in the Council, coupled with European Parliament lobbying by the CER and the ETF, thwarted the Commission’s push for ‘radical policy change’ (Dyrhauge, Reference Dyrhauge2022: 866). In 2017 however, the CJEU condemned Germany for failing to take all the necessary measures to ensure the transparency of accounts between Deutsche Bahn and its subsidiaries,Footnote ¹⁰ some of which operate in other member states. Hence, in the German case, policy change resulted from a CJEU ruling rather than NEG prescriptions or the adoption of new EU laws.

Finally, the Commission used its dual role as investigator and decision maker in EU competition law to advance its commodification agenda. This happened in the case of the privatisation of the freight train company CRF Marfă, which failed despite the MoU-related NEG prescription discussed above. In turn, the Commission brought CRF Marfă to the brink of insolvency when it ordered it to pay back the €363m of state aid that it had received, in agreement with the Council and the IMF, to facilitate its privatisation (Commission Decision 2021/69, Recital 107).Footnote ¹¹

Phase One: Preventing Regime Competition on Water Quality

Community legislation targeting the water sector started to appear in the 1970s, with specific directives on quality standards (Directive 75/440/EEC, Directive 79/869/EEC). Taking a more comprehensive approach, in 1980 the Council adopted Directive 80/778/EEC on the quality of water intended for human consumption, commonly known as the Drinking Water Directive (DWD). As their basis, the directives invoked Art. 2 of the Treaty establishing the European Economic Community (EEC Treaty), which outlined the Community’s central aims.Footnote ¹ These directives stated that the approximation of laws across member states was needed, as the differences in national legislation might create differences in the ‘conditions of competition and, as a result, directly affect the operation of the common market’ (Directive 80/778/EEC, Preamble). The directives aimed to tackle the disparities in quality standards across member states, which could have been exploited as unfair competitive advantage. Despite the directives’ semantic links to the common market project, they pointed in a decommodifying policy direction, as they took water quality out of regulatory competition.

The DWD was first updated in 1998, catching up with some of the new developments in the sector since 1980, including quality standards for bottled water. Nevertheless, some of the more ambitious quality goals, such as odour, taste, or colour, were dropped from the final text of the directive because of objections by water suppliers. For these reasons, the cost implications of the Water Framework Directive (WFD) were relatively modest and were spread out over a long timeframe (Hall et al., Reference Hall, Lanz, Lobina and de la Motte2004: 11–12).

Phase Two: Towards the Commodification of Public Water Services

By contrast to the DWD case discussed above, the implementation of the Urban Waste-Water Treatment Directive (91/271/EEC) entailed much higher costs, transforming the financing models of water investment and also strengthening the position of the private sector. The infrastructural developments needed to comply with the waste-water directive amounted to ‘arguably the largest common infrastructure project undertaken by the EU in its history’ (Hall and Lobina, Reference Hall and Lobina2007: 65). This strained the budgets of municipalities and national governments that were under pressure to fulfil the Maastricht deficit and debt targets in the run-up to the introduction of the Euro (see Chapter 7). Implementing the directive was also challenging financially in Central and Eastern European countries that joined the EU in the 2000s. Subsequently, a large share of European regional and cohesion funds was used to meet this challenge. Overall, the financing needs of waste-water investment combined with EU-wide austerity contributed to strengthening the role of water TNCs, especially in Central and Eastern Europe, including one of our country cases, Romania (Hall et al., Reference Hall, Lanz, Lobina and de la Motte2004: 13; Hall and Lobina, Reference Hall and Lobina2007: 66). Private companies usually undertook these projects in public–private partnership (PPP) and concessions arrangements (Ménard, Reference Ménard, Ménard and Ghertman2009).

EU-level legislation in water services obtained a much more explicit legal base with the Treaty of Maastricht in 1992. Art. 130s TEC (now Art. 192 TFEU) established the EU’s competence for setting environmental standards in the area, thereby enabling EU legislators to adopt EU laws concerning the management of water resources. Building on these new powers, in 2000 the EU adopted the WFD as the main and most comprehensive piece of European legislation in water services. The directive has the ambition to cover all relevant aspects of water management in Europe, the protection of drinking water being only one objective. Unlike the DWD or the Waste-Water Treatment Directive, the WFD contains few direct technical targets but operates at a more general level, setting guidelines and principles for a variety of connected stakeholders.

The WFD embodies the contradictions of the Europeanisation of the water sector. The preamble to the directive declares that water ‘is not a commercial product like any other but, rather, a heritage which must be protected, defended and treated as such’ (Directive 2000/60/EC, Recital 1). The above decommodification principle stands in contradiction to the directive’s embrace of the idea that market mechanisms, in particular pricing, can be used effectively to achieve the goal of sustainable water management. The WFD is couched in market-based terminology, such as supply and demand, and requires member states to prepare economic analyses of water use in their areas.

A significant element of the directive is the cost recovery principle, which demands an adequate financial contribution from water users and polluters to cover the costs of the environmental protection of water. Art. 9 of the directive (titled Recovery of costs for water services) prescribes that ‘Member States shall ensure by 2010 that water-pricing policies provide adequate incentives for users to use water resources efficiently, and thereby contribute to the environmental objectives of this Directive’ (Directive 2000/60/EC, Art. 9). Art. 9 also includes a derogation from the adequate water-pricing principle on the basis of ‘established practices’ that allowed Ireland to continue financing water services from general taxation.

To sum up, our review of the relevant documents suggests that EU environmental legislation in the field of water management has assumed an increasingly commodifying character over time, even though this happened gradually and has not flipped the balance of policymaking, which is still dominated overall by ideas of regulating rather than expanding the market. Two mechanisms propelled the limited commodification of environmental rules.

First, private actors dominated the infrastructural investment projects needed to achieve the standards set out in the Waste-Water Treatment Directive. Second, the WFD introduced an overarching theme into water-related EU legislation that considers the market mechanism as an effective way of solving environmental problems. Even though this formulation is vague in the text of the directive, the Commission and the European Environment Agency recurrently interpreted the provision in their communications and reports in a commodifying way, for example by emphasising the responsibility of individual households to protect water resources by paying the market price for drinking water (Page and Kaika, Reference Page and Kaika2003: 339–340; Kirhensteine et al., Reference Kirhensteine, Clarke, Oosterhuis and Munk Sorensen2010; European Commission, 2012; European Environment Agency, 2013).

Phase Three: Frontal but Unsuccessful Attempts to Commodify Water

The shift towards more commodification in environmental legislation in the early 2000s was matched by the first direct attempts in European economic governance to liberalise water provision. Until in the 2000s, sector-specific liberalising directives did not target drinking water and sanitation services, although other network industries (such as electricity, gas, transport, and telecommunication) were made part of the EU internal market (see Chapters 7 and 8; Bieling and Deckwirth, Reference Bieling and Deckwirth2008: 242; Crespy, Reference Crespy2016: 43).

With the appointment of the neoliberal Dutchman Frits Bolkestein as Commissioner for Internal Market and Taxation in 1999, pro-commodification actors started to show more interest in the water sector. Bolkestein championed an outspoken, radical, and comprehensive agenda of service liberalisation, stating explicitly that such an agenda should include water. This view on water is documented not only in the Commissioner’s speeches but also in Commission-sponsored policy studies and a Commission communication (Bolkestein, Reference Bolkestein2002; Gordon-Walker and Marr, Reference Gordon-Walker and Marr2002; European Commission, 2003).

Bolkestein advocated the commodification of the water sector as ‘a practical instrument for establishing the correct relationship between price, quality and the standard of the service provided’ (Bolkestein, Reference Bolkestein2002: 6). Following up on this, the Commission’s Communication on Internal Market Strategy Priorities 2003–2006 stated that the Commission would launch a comprehensive review of the sector and consider ‘all options’, including legislative proposals in the area of competition law, while respecting neutrality of ownership and public service obligations (European Commission, 2003: 13–14).

Despite the radically pro-commodification attitude of the Commissioner and the ambitious tone in the reviewed policy documents, the text of the directive proposed by the Commission on the Services in the Internal Market eventually treated the water sector as an exception. The Commission’s proposal, published in March 2004, allowed for derogations for non-economic services of general interest (including water) from the country-of-origin principle, the most controversial part of the directive (see Chapter 7). The scope of the Services Directive in its final form (2006/123/EC) is even more restrictive, excluding not only ‘water distribution’ but also ‘water distribution and supply services and wastewater services’. EU legislators finally excluded water services from the final directive as a result of transnational protests in favour of people’s access to water as a human right – a claim that found support in the European Parliament and among central member state governments (Crespy, Reference Crespy2016). We discuss the development of vital countermovements in more detail in section 9.4.

Prescriptions on Users’ Access to Water Services

Cost-coverage mechanisms: Among the four countries under study here, Ireland received the most detailed and explicit NEG prescriptions to commodify its water sector through the introduction of household water charges. The primary goal of the charges was to make user access conditional upon payment; therefore, these prescriptions fall under the category of access to services in general and cost-coverage mechanisms in particular. The establishment of a commercial relationship between service providers and users had links to the categories of resources for providers and provider-level governance. The original MoU of 2010 and its updates until 2013 repeated two general goals for Irish governments to follow: the transfer of responsibilities from local authorities to a national water utility (later to be named Irish Water; now Uisce Éireann) and the introduction of water charges.Footnote ³ The introduction of water charges is a clear example of how the NEG regime interpreted environmental principles in a commodifying way and how it used fiscal policy tools to promote marketising structural reforms.

The MoU signed in December 2010 committed the Irish government ‘to move towards full cost-recovery in the provision of water services’ (MoU, Ireland, 16 December 2010: Memorandum of Economic and Financial Policies, 8, paragraph 24), despite Ireland having received a derogation from the cost recovery principle in the EU WFD in 2000 to protect its system of financing water provision for domestic users from general taxation. The introduction of water charges in the bailout programme would have put an end to this derogation recognised in EU law.

The sixth update of the MoU committed the Irish authorities to ‘consider and provide an update on the general government debt and deficit treatment implications of establishment of Irish Water’ (MoU, Ireland, 6th update, 13 September 2012). The seventh and eighth updates demanded that, over time, the Irish government’s budget plans should ‘be based on Irish Water becoming substantially self-funded’ (MoU, Ireland, 7th update, 25 January 2013; 8th update, 12 April 2013).

The discussion of water charges in the context of cost recovery and government deficit would suggest that the main purpose of the introduction of the charges was related to the curtailment of public spending. Given the small share of the sector in government spending however, revenues expected from the introduction of domestic water charges would have provided only a small contribution to fiscal adjustment (European Commission, 2014c: 30). The primary goal of charging for water was therefore not to ensure the environmental protection of water, and not even to balance budgets, but to marketise access to water and introduce the cash nexus into the relationship between users and providers.

Updates to Ireland’s MoUs between 2011 and 2013 prescribed ever more detailed measures towards the introduction of water charges, including the collection of precise data on the progress of water meter installation. The ninth and tenth updates of the 2013 MoUs contain numerical annexes on ‘the quantum of pre-installation surveys completed, and water meters installed by geographical area’ (MoU, Ireland, 9th update, 3 June 2013; MoU, Ireland, 10th update, 11 September 2013). Nevertheless, the Troika left Ireland before the introduction of water charges and even before the installation of water meters had finished. The introduction of water charges triggered a long wave of social-movement and union protests in Ireland in 2014 and 2015, including a water bill boycott campaign supported by large sections of the Irish population, which eventually forced the government to suspend the charging system in 2016 (Hilliard, Reference Hilliard2018; Bieler, Reference Bieler2021; Moore, Reference Moore2023). After 2013, the EU’s NEG prescriptions no longer mentioned water charges, even though the Commission’s Country Reports continued to monitor Irish governments’ attempts to introduce them. By contrast, EU executives issued no prescriptions to Germany, Italy, and Romania on user access, as their water systems were already financed mainly by user charges and tariffs (Armeni, Reference Armeni2008; ver.di, 2010).

Coverage levels: Only Romania received a decommodifying prescription in the access to services category, pertaining to coverage levels. In 2016, Romania received an NEG prescription that urged the Romanian government to improve people’s access to integrated public services in disadvantaged rural areas where water and waste-water services are often simply lacking (Council Recommendation Romania 2016/C 299/18).Footnote ⁴ If one assesses this prescription in its semantic context, it appears to have been motivated by genuine concerns about social inclusion, but, compared with NEG’s countervailing commodifying prescriptions, this social prescription was much less specific. Neither the NEG prescription nor the corresponding Country Report (Commission, Country Report Romania SWD (2016) 91) outlined how such an extension of people’s access to public services could be financed. The prescription was also merely aspirational given its weak enforcement power, by contrast to those related to MoU-, excessive deficit-, or excessive macroeconomic imbalance procedures.

Prescriptions on the Provision of Water Services

Provider-level governance mechanisms: Marketising structural reforms formulated within the NEG framework did not only aim to set up new market-conforming rules for users’ access to water services. They also intervened in the ownership and internal operation structure of the public entities that provide these services. Here, we see a break with the methods of the ordinary legislative procedures that formally respected the neutrality of ownership principle laid out in Art. 345 TFEU (Golden, Szabó, and Erne, Reference Golden, Szabó and Erne2021). Breaking with this tradition, NEG prescriptions explicitly declared that governments should copy the more efficient private sector as the operating model for the water sector, even though they stopped short of calling for direct privatisation.

In Ireland, local governments provided water services until 2013, when, as part of MoU conditionality, a new law transferred water services to the newly incorporated national utility firm, Irish Water (Hilliard, Reference Hilliard2018). Although water charges were abolished in 2017 after sustained mass protest, the corporate model of service provision remained intact, with important commodifying implications for water workers who were going to lose local government employee status and the protections laid down in public sector collective agreements. To fend off this threat, in 2022, Irish unions secured an agreement at the Irish Workplace Relations Commission, whereby Irish Water and local authorities pledged that there would be no compulsory transfer of staff from local authorities to Irish Water (ICTU, 2022). This agreement, however, does not stop Irish Water from hiring new staff members on worse terms and conditions.

In Italy, NEG prescriptions outlined how the government should transform the operation of state-owned enterprises. In this area, the two most frequently repeated goals were the reform of publicly owned enterprises, on the one hand, and efficiency improvements, on the other, fitting the general principles of new public management (Kahancová and Szabó, Reference Kahancová and Szabó2015).

Sector-level governance mechanisms: Within the broader issues of sector-level governance, the introduction of market relations between providers dominated the prescriptions issued to Germany and Italy. The two countries received similar NEG prescriptions about improving market access and promoting competition between service providers. The prescriptions condemned the allegedly high share of in-house awards for the delivery of public services and promoted the opening up of these contracts to procurement procedures and concessions. Another NEG prescription, issued to Germany in 2013, called for an increase in the value of public contracts open to procurement (Council Recommendation Germany 2013/C 217/09). Although the content was similar, the tone of the 2014 prescription was less sharp, as it demanded only that the German government should ‘identify the reasons behind the low value of public contracts open to procurement under EU legislation’ (Council Recommendation Germany 2014/C 247/05). Germany continued to receive recommendations to enhance competition between 2014 and 2017 but with a specific focus on the railway sector (see Chapter 8) and, later, professional and business services. German local public services received one more commodifying prescription in 2017, when the CSRs identified planning constraints as a hindrance to investment.

The Italian case provides the most consistent example of how the NEG regime advanced commodification of the water sector through marketising reforms. Unlike in the German and the Irish CSRs, the commodifying prescriptions in the Italian CSRs were not counterbalanced by decommodifying prescriptions, and they formed a coherent theme even after the alleged social turn of the European Semester in 2014 (Zeitlin and Vanhercke, Reference Zeitlin and Vanhercke2018). Calls to open up local public services and network industries to competition appeared first in the Italian CSRs in 2012, prescribing the adoption of specific laws to achieve this goal. In particular, the 2013 Country Report for Italy picked water services as a negative example where no progress had been made in the promotion of competitiveness and efficiency, whereas it welcomed the separation of the operator from the network manager in the gas sector (Commission, Country Report Italy SWD (2013) 362). The Commission’s criticism came after Italian citizens voted in June 2011 by a more than 95 per cent majority to repeal the law that allowed the private sector to manage local public services. Incidentally, the centre-right Berlusconi government tried to invalidate this abrogative referendum in favour of public water services by calling on citizens to boycott it, but the Italian social movements and trade unions that had launched the referendum nevertheless succeeded, as it exceeded the 50 per cent participation quorum laid down in Italian law (Bieler, Reference Bieler2015). The abrogation of the law by referendum, however, did not prevent both centre-right and centre-left governments from reintroducing similar laws at national and regional level afterwards (Di Giulio and Galanti, Reference Di Giulio and Galanti2015; Erne and Blaser, Reference Erne and Blaser2018).

Resources for public water services: The decommodifying prescriptions issued for Germany, Ireland, and Romania focused on resources for providers. By contrast, Italy did not get any decommodifying prescriptions on water services. After 2015, Germany received prescriptions that tasked its government to increase investment in public infrastructure, particularly at local level. The emphasis on municipalities is crucial from the perspective of the water sector, as in Germany the provision of water services is the responsibility of municipalities, and at the same time municipalities were under severe fiscal pressure from the German debt brake (Schuldenbremse) and EU deficit rules (Bajohr, Reference Bajohr2015).

Investment in water also featured in NEG prescription issued to Ireland. Four of them directly and specifically dealt with the water sector between 2016 and 2019, tasking the Irish government to invest more in water services. Investment in water was never a stand-alone item but rather part of a broader productive, public infrastructure agenda. We labelled these prescriptions as decommodifying as seen in Table 9.2. Although the direction of NEG prescriptions on the resources for water was decommodifying, we must qualify this assessment on two counts.

First, the corresponding Irish NEG prescriptions from 2016 and 2017 used the term ‘prioritise government expenditure’ in the water sector, implying that additional public investment in the water sector must be counterbalanced by cutbacks in other areas (Council Recommendations Ireland 2016/C 299/16 and 2017/C 261/07). The same holds true in the Romanian case, where the 2016 NEG prescription on infrastructure projects in the waste-water sector called for a ‘prioritisation’ of investment in them (Council Recommendation Romania 2018/C 320/22).

Second, EU executives linked the need for increased investment to water charges as a potential source of extra funding (Commission, Country Report Ireland SWD (2016) 77: 62). The Commission’s Country Report also justified the need for more resources to compensate for the preceding ‘seven years of sharply reduced government investment’ that ‘have taken a toll on the quality and adequacy of infrastructure’ (Commission, Country Report Ireland SWD (2016) 77: 4 and 61). The report, however, is oblivious of the reasons why there was underinvestment in the first place. It did not mention that the MoUs’ cost-cutting recommendations had played their part in underinvestment.

Pursuing the Commodification of the Water Sector through NEG Prescriptions

To summarise the findings of our analysis of NEG prescriptions: we uncovered a transnational agenda of commodification in the water sector in Germany, Ireland, and Italy. We explained the absence of commodifying prescriptions for Romania by the fact that its government had already achieved the commodification of its lucrative urban water services in the run-up to EU accession. In the other three countries, NEG prescriptions continued the commodifying agenda that had its roots in the Commission’s legislative agenda preceding NEG, starting with the commodification turn of EU environmental laws and Commissioner Bolkestein’s attempts at water services liberalisation in the early 2000s. EU executives linked the introduction of water charges in Ireland explicitly to the WFD’s cost recovery principle, even though Ireland had secured an opt-out from it in EU law. NEG prescriptions targeted the Irish system of financing public water provision from general taxation, which the European Commission (2003: 14) had already denounced in 2003. EU executives also formulated the NEG prescriptions for Germany and Italy to open up local public water services to external competition in the spirit of Commissioner Bolkestein’s draft Services Directive (COM (2004) 2 final/3). The European Commission and the Council of finance ministers could do that, as the shift to the NEG regime empowered them to pursue an agenda that had been rejected by the European Parliament when it comprehensively excluded the water sector from the final Services Directive (2006/123/EC). Our analysis also revealed that commodifying prescriptions exclusively targeted qualitative characteristics of water governance through marketising structural reforms. By contrast, there were no water sector-related prescriptions that tasked member states to curtail the resources for them. We must, however, reiterate here that water services had also been affected by the prescriptions that tasked governments to cut public spending in general (see Chapter 7).

Concretely, all qualitative NEG prescriptions that targeted water services governance mechanisms, namely, those on cost-coverage mechanisms and provider-level and sector-level governance, pointed in a commodifying policy direction across all years and all countries. This means that they were informed by an overarching policy script of commodification. We also observed a few decommodifying prescriptions that called for quantitative changes, namely, more public resources for the German, Irish, and Romanian water sectors and an expansion of service coverage levels in Romania. These decommodifying prescriptions, however, were not only scarce and weaker in terms of their coercive power but also informed by a reasoning that did not contradict the overarching commodifying policy script of NEG, with one exception. All qualitative NEG prescriptions on the governance mechanisms for water services followed a common logic of commodification across countries and time, with the exception of Romania, which, as explained, had already privatised the lucrative water services in its urban areas in the run-up to its EU accession. Hence, NEG’s overarching commodification script extended to all country cases, regardless of their location in the EU’s political economy. At the same time, the coercive power of the corresponding NEG prescriptions still differed across them, ranging from very significant in the Irish case during the MoU period, to significant in the Italian case in the face of excessive economic imbalances, to weak in the German case, mirroring their different locations in the NEG enforcement regime at a given time.

Whereas all commodifying NEG prescriptions served the same overarching policy agenda, the decommodifying prescriptions received by Ireland, Germany, and Romania were semantically linked to other aims, namely, boosting competitiveness and growth, rebalancing the EU economy, social inclusion, or transition to a green economy. In the Irish case, EU executives linked several decommodifying prescriptions for more investments in the ailing water sector to investment prioritisation to boost competitiveness and growth. Hence, the aims that informed these prescriptions were compatible with further austerity in other areas that were not deemed as so critical to achieving this objective. The aim of boosting competitiveness and growth through more investments in water services also played a key role in Germany. By contrast to Ireland however, the investment turn in German NEG prescriptions was unqualified, as it extended to the entire public sector and to all levels of government. This echoes the presence of another objective in the German case, namely, NEG’s rebalancing of the European economy agenda. As increased public investments would boost domestic demand in Germany, they would also contribute to a reduction of the trade imbalance between Germany and other countries located in more peripheral positions of the EU economy (see Chapters 6 and 7). At the same time, EU executives continued to issue commodifying prescriptions that urged the German government to reform the mechanisms governing the water sector in a market-conforming way. In turn, the German government added a greater involvement of private capital and know-how in municipal infrastructure projects as a priority in its 2017 national reform programme (Bundesministerium für Wirtschaft und Energie, 2017: 17). Hence, the decommodification prescriptions that aimed to boost competitiveness and growth and/or to rebalance the EU economy did not go against NEG’s overarching commodification script (Chapter 11).

Romania and Ireland also received decommodifying prescriptions, which did not contradict NEG’s overarching commodification script. In 2018 and 2019, the Irish prescriptions on the prioritisation of public investment mentioned the role of ‘improved infrastructure’ as a ‘critical enabler’ for the ‘enhancement of private investment and productivity growth’ and not just for ‘balanced regional economic development’ and Ireland’s ‘transition towards a low-carbon and environmentally resilient economy’ (Council Recommendation Ireland 2018/C 320/07: Recital 12). The policy rationale of enhanced social inclusion, which clearly goes against NEG’s overarching commodification script, guided NEG water prescriptions only once, namely, in the case of the 2016 prescription that tasked the Romanian government to extend basic infrastructure ‘in particular in rural areas’ (Council Recommendation Romania 2016/C 299/18) to reduce Romania’s key development disparities ‘between urban and rural areas’ (2016: Recital 17). When EU executives repeated this 2016 prescription in 2018 however, they stressed the benefits of quality infrastructure for economic growth rather than social inclusion (Council Recommendation Romania 2018/C 320/22: Recital 19), even though large parts of Romania’s rural population still had no access to safe drinking water, by contrast to all EU countries and even many developing countries (see footnote 4). If we consider the scarcity and the weak coercive power of the prescriptions that were at least partially informed by social concerns, we can hardly speak about a social turn of the NEG regime (Zeitlin and Vanhercke, Reference Zeitlin and Vanhercke2018). Likewise, the equivocal semantic links between the weak 2018 and 2019 prescriptions on the prioritisation of public investment in water services for Ireland and the transition to a green economy hardly warrant speaking about an ecological shift in the NEG regime either. Whereas these semantic links prefigured the growing importance of a green agenda in the post-Covid NEG regime (Chapter 12), our preceding analysis of the market terminology in the WFD indicates that the growing salience of green concerns does not necessarily lead to a policy shift in a decommodifying direction.

EU Governance of Water Services by Law after the Shift to NEG

EU executives pursued a water services commodification agenda already before 2009, but their NEG prescriptions went further, as the scope of NEG interventions was much more ambitious. NEG prescriptions in the water sector targeted areas that were considered taboo during earlier phases of EU integration, such as directly prescribing a change in the legal status or operating principles of public services. We should add, however, that the interaction between ordinary legislative procedures and NEG went in both directions. NEG has not replaced the traditional sources of EU authority. The EU’s ordinary legislative processes run parallel with NEG mechanisms, including in the water sector. There have been four prominent cases of intervention or intervention attempts by ordinary EU laws in the water sector since the shift to NEG after the financial crisis: namely, the Concessions Directive (2014/23/EU), the revised Procurement Directives (2014/24/EU, 2014/25/EU), and the recast of the Drinking Water Directive (2020/2184).

A concession is a long-term contractual relationship between a contractor and a service provider, a step beyond the short-term (one-off) and unidirectional relationship of procurement. As the contractor is typically a public body and the provider is a private firm in these relationships, the legal form of the concession is closely linked with the increased use of PPPs (Porcher and Saussier, Reference Porcher and Saussier2018). In 2011, the Commission proposed a stand-alone directive on concessions, which would have facilitated the use of the concession model in water services across the EU. The Concessions Directive would have benefitted French water TNCs, as concessions law was the legal framework that contributed to their successful long-term operation in France (Guérin-Schneider, Breuil, and Lupton, Reference Guérin-Schneider, Breuil, Lupton and Schneier-Madanes2014). The spread of the concession model to other parts of the EU would have vested these companies with a competitive advantage over other service providers that were used to a different legal regime. In reaction to the success of the Right2Water ECI, however, the Commission excluded water from the final scope of the directive (see section 9.4). The parallel development of the NEG regime and policymaking by ordinary EU laws is also shown by the fact that Germany received NEG prescriptions to increase the value of contracts open to public procurement in 2013 and 2014, that is, the same years when EU legislators revised the Procurement and Concessions Directives.

Whereas the draft Concessions Directive attempted to commodify water services through ordinary EU laws, the recasting of the Procurement Directives and the DWD also included potentially decommodifying policy features. The legislative procedure for the Concession Directive ran in parallel with the recasting of the Procurement Directives. Pressure from unions and social movements, including the European Federation of Public Service Unions (EPSU), forced the inclusion in the Procurement Directives of stipulations about social and environmental clauses in procurement calls (see Chapter 7; Fischbach-Pyttel, Reference Fischbach-Pyttel2017). Likewise, the recast DWD dealt with a social question in detail, namely, that of people’s access to drinking water. Art. 16 of the directive advances the decommodification of water by obliging member states to improve or maintain access to safe drinking water for all, with a focus on the most vulnerable social groups. The non-binding Pillar of Social Rights adopted by all EU institutions in 2017 included water as an essential service with access rights for everybody, but the new DWD gave a more tangible expression to this principle (EPSU, 2021).

Both the exemption of water from the Concessions Directive and the inclusion of water access rights in the DWD were prompted by the pressure that social movements exerted on EU policymakers, namely, through the Right2Water ECI coordinated by EPSU. The transnational countermovements fighting for the right to water at European level, however, started much earlier. They are the subject of section 9.4.

Phase One: Decommodifying Cross-border Care to Create a European Labour Market

In the 1950s, EEC policymakers agreed to create a common market, while also building national welfare states that gave people access to health services without having to rely on the market. Although European policymakers across countries built different types of decommodified health and welfare services (Esping-Andersen, Reference Esping-Andersen1990), they agreed to foster workers’ mobility across borders (Haas, Reference Haas1958 [2004]). Consequently, the EEC facilitated the free movement of workers across borders by adopting regulations that gave them access to health services in their host countries. Hence, European law effectively decommodified access to cross-border care, although that was done to create a common labour market.

Although the EEC Treaty did not include healthcare among the Community’s competences, it stipulated that ‘The Council, acting by means of a unanimous vote on a proposal of the Commission, shall, in the field of social security, adopt the measures necessary to establish the free movement of workers’ (Art. 51 TEEC, now Art. 48 TFEU). This led to the adoption of the EEC’s third regulation (Regulation 3/58), which sought to build a common labour market by ensuring that workers’ social security rights were safeguarded if they moved to another member state. These rights included ‘the acquisition, maintenance, and recovery of the right to [medical] benefits’ (Regulation 3/58). Although stopping short of harmonising social security systems (Hatzopoulos, Reference Hatzopoulos and de Búrca2005), the regulation recognised the public, solidaristic character of health services in EEC member states and sought to reconcile this with the treaty’s articles on the free movement of workers. As seen in Chapter 4, solidaristic welfare provisions (including in healthcare) aimed to support capitalist accumulation by partially shielding labour from market forces. Likewise, the regulation aimed to create a European labour market by seeking to increase migrant workers’ protection in the event of sickness, thus partially decommodifying their social reproduction.

In the next decades, the regulation’s remit was extended from mobile workers to ‘all nationals of Member States insured under social security schemes for employed persons’ (Regulation 1408/1971) and, further, to self-employed persons, civil servants, students, and third country nationals. These extensions resulted in a patchy, category-specific coverage (Fillon, Reference Fillon and Jorens2009) but went hand in hand with the building, since the Maastricht Treaty, of European citizenship (Kostakopoulou, Reference Kostakopoulou2007). By the mid-2000s, these developments had culminated in the adoption of the Citizens’ Rights Directive setting out the conditions for the exercise of the right of free movement (2004/38/EC), a new amendment to Social Security Regulation (631/2004), and a new Regulation (883/2004) ‘on the coordination of social security systems’. The amendment aligned the rights of the different categories of people introduced by previous extensions, thus reshaping what we could call a social security route to cross-border care along non-discriminatory lines.

The contribution of social security regulations to the decommodification of access to cross-border care has nonetheless not been without contradictions. Under the regulations, reimbursement of cross-border care has been at the charge of the country of origin (rather than of the host country or a European health fund). Thus, although the regulation recognises the principle of solidarity, it limits it to the country of origin. Moreover, as shall be seen below, since the 1980s, the CJEU has progressively encroached on the regulations’ (and thus member states’) dominion over access to cross-border care and its reimbursement (Fillon, Reference Fillon and Jorens2009). In response, governments used the Amsterdam Treaty (1997) to state that European actions in public health should respect member states’ ‘responsibilities … for the organisation and delivery of health services and medical care’ (Art. 152 TEC, now 168 TFEU). This treaty change did not, however, prevent the EU from playing an ever-greater role in European healthcare governance, as outlined below.

In response to CJEU rulings, the Council and the European Parliament amended the social security regulations. The bone of contention was governments’ use of pre-authorisation of cross-border care to keep healthcare expenditure under control. Pre-authorisation featured in the regulations as a condition for accessing care on changing residence to another member state as well as for accessing planned cross-border care, that is, care for which patients travel on purpose to another member state. Under pressure from CJEU case law, EU social security regulations had to stipulate the conditions under which member states may not refuse the authorisation (and thus the reimbursement) of cross-border care. Over time, these have moved from cases where competent (paying) countries cannot provide the treatment in question (Regulation 1408/1971), to those where they cannot provide it ‘within a time limit which is medically justifiable’ (Regulation 883/2004). In the process, member states’ leeway in refusing the authorisation of cross-border care was reduced.

In addition, social security regulations allowed for coverage of unplanned cross-border care occurring during a temporary stay abroad. In this case, as no pre-authorisation was stipulated, the governance of access to cross-border care was left to medical professionals, who were to assess whether a migrant worker’s ‘condition … necessitates immediate benefits’ (Regulation 1408/1971) and, later on, whether insured persons needed ‘medically necessary’ care (Regulation 883/2004). The span of coverable care was consequently extended beyond strict emergencies.

The regulations further facilitated access to unplanned cross-border care by the introduction, in 2004, of the European Health Insurance Card (EHIC) (Regulation 631/2004). The card reflects the contradictory contribution of social security regulations to the decommodification of cross-border healthcare in Europe. Thus, on the one hand, the EHIC contributes to it inasmuch as it gives mobile Europeans who are insured in their home country access to health services in their host country under the same conditions as host country residents. The redistributive mechanisms on which decommodification is based remain, however, at national rather than EU level: it is the country of origin (rather than an EU healthcare fund) that bears the costs of cross-border care and of administering the card. As a result, care price differentials between poorer and richer countries and large differences in healthcare expenditure between countries entails EHIC being a notable financial burden for poorer member states, whereas the richer states profit from it (Stan, Erne, and Gannon, Reference Stan, Erne and Gannon2021). Given the unequally distributed means to engage in international travel across the EU (Hugree, Penissat, and Spire, Reference Hugree, Penissat and Spire2020), the card’s use has been uneven between different social classes and regions in the EU. EHIC use thus sustains rather than reduces healthcare inequalities across the EU; this goes against the EU’s stated ambition to foster territorial and social cohesion (Stan and Erne, Reference Stan and Erne2021b).

Through the social security regulations, EU law thus generated a limited, but definite, decommodifying potential for cross-border healthcare. From the 1990s onwards however, the single market, economic and monetary union (EMU), and EU accession processes put new pressures on healthcare spending, thereby triggering commodifying policy changes in the sector.

Phase Two: Single Market, EMU, and Healthcare Commodification

In a second phase, which shaped the 1990s, national health services began to be exposed to European market integration pressures – despite the introduction of a decommodifying public health title into the Maastricht Treaty in 1993. The treaty’s EMU convergence criteria, however, were more consequential, as they led governments to restrain healthcare expenditure and to introduce reforms marketising their health services. In countries with healthcare services directly financed by state budgets, as in Italy and Ireland, these reforms were meant to help those countries meet the public debt and deficit criteria to join the eurozone. In countries where healthcare is financed through payroll taxes for sickness funds or health insurances, as in Germany, healthcare reforms were meant to contain unit labour costs to boost the country’s competitiveness. In Central and Eastern Europe (CEE), the Copenhagen EU accession criteria exerted similar economic and fiscal adjustment pressures. As a result, the more policy reforms commodified healthcare services, the more they became subject to EU competition law, and corresponding Commission and CJEU actions.

Fiscal governance and healthcare commodification: In 1993, the Maastricht Treaty introduced ‘ensuring a high level of health protection’ among the objectives of the Community (Art. 3(o) TFEU) and the competences it shared with member states (Art. 4(k) TFEU). Although ‘health protection’ seems broad enough to include healthcare, the treaty’s new health title referred only to public health (Art. 168 TFEU), implying that the EU may adopt legislation to prevent diseases rather than to treat them. Crucially however, the treaty not only mentioned public health but also urged a tighter coordination and convergence of member states’ fiscal and macroeconomic economic policies. This treaty introduced debt and deficit convergence criteria and placed the Commission at the steering wheel of the multilateral surveillance process underpinning convergence (Arts. 121 and 126 TFEU). In a parallel process, the Copenhagen EU accession process created similar multilateral surveillance procedures. The resulting fiscal governance strand in EU healthcare law was thus born.

The fiscal convergence criteria placed increasing pressure on healthcare expenditure in EU member and accession states. In countries with taxation-financed health systems (like Italy and Ireland), convergence criteria put pressure on public budgets, which then trickled down to their healthcare component. This was the case for Italy, where public health expenditure fell from 6.6 per cent of GDP in 1991 to 5.3 per cent in 1995. Although it recovered thereafter, it was still below 6 per cent by 2000 (France, Taroni, and Donatini, Reference France, Taroni and Donatini2005: 191–192). In response to increased international competition prompted by the European single market and EMU, many governments sponsored social pacts and other corporatist arrangements with social partners to moderate unit labour costs (Erne, Reference Erne2008). In countries with payroll tax-financed health systems, governments also acted unilaterally to contain them. In Germany for example, the Schröder government not only curtailed wage growth with its Hartz labour market reforms (Chapter 6) but also cut payroll taxes for sickness funds by 0.9 per cent to boost Germany’s competitiveness (Schulten, Reference Schulten2006). Thereafter, German sickness funds faced increased constraints, even though their budgets were not directly affected by national or EU debt-brake rules.

In response to pressures on healthcare expenditure, governments across Europe adopted healthcare reforms that sought to reduce their responsibility for funding and providing health services. These reforms took similar pathways, irrespective of whether healthcare was financed through national health systems or sickness funds. This was done either directly by curtailing resources for public healthcare or indirectly by making provider-level governance more market-like, by opening the sector to competition from private providers, and by privatising access to health services. In 2003 and 2004 for example, the Schröder government introduced the case-based (diagnostic-related groups: DRG) payment method for financing hospitals, reduced sickness funds’ basic benefits package, and introduced co-payments for medical services (Busse and Blümel, Reference Busse and Blümel2014; Kunkel, Reference Kunkel2021). Furthermore, many regional Länder and local governments privatised and corporatised their public hospitals in response to the fiscal constraints that they were facing, despite trade union and social-movement protests (Schulten, Reference Schulten2006; Erne and Blaser, Reference Erne and Blaser2018). Major publicly funded but privately owned for-profit healthcare operators emerged in turn. In Italy, healthcare reforms during the 1990s and 2000s transformed local healthcare providers into enterprises, opened the national health service to contracting with private providers, introduced from 1995 onwards the DRG method for hospital financing, and limited the basket of services in 2001 (Ferre et al., Reference Ferre, de Belvis and Valerio2014; France, Taroni, and Donatini, Reference France, Taroni and Donatini2005). During the 1990s and the 2000s, Ireland’s healthcare system continued to be strongly reliant on private provision, with around half of the population having recourse to private insurance to access quicker treatment and doctors being allowed to treat private patients in private beds situated in public hospitals (McDaid et al., Reference McDaid, Wiley, Maresso and Mossialos2009). At the turn of the millennium, the Romanian government transformed its healthcare system from a state-funded national health system into an insurance-funded one and introduced the DRG method for financing hospitals. In 2006, a new law allowed the externalisation of services to private contractors and the opening of the national health fund to contracts with private providers (Stan, Reference Stan and Carrier2018; Stan and Toma, Reference Stan and Erne2019).

The increased horizontal market integration pressures triggered by the European single market, EMU, and EU eastward enlargement led governments to commodify healthcare, albeit along varying dimensions and to different degrees. By doing that, governments sought not only to cut costs but also to use a governance-by-numbers approach (e.g., DRG financing methods) to insulate healthcare from democratic policymaking (Lascoumes and Le Galès, Reference Lascoumes and Le Galès2004; Kunkel, Reference Kunkel2021). As shall be seen in section 10.3, this became relevant for the ways in which NEG was deployed across member states from 2008 on.

Healthcare and EU competition policy: As outlined in Chapter 7, since the launch of the single market programme by the Single European Act of 1986, the Commission has pushed for the commodification of public services, notably in network industries. Initially however, it excluded health services from this process. Nonetheless, the more healthcare reforms led to the commodification of health services, the more the CJEU could bring in EU competition law and treat health providers and insurers as undertakings engaged in commercial activities (Arts. 101–106 TFEU) (Hatzopoulos, Reference Hatzopoulos and de Búrca2005; Hervey and McHale, Reference Hervey and McHale2015). At the same time, the CJEU had to consider the notion of ‘services of general economic interest’ (SGEI) (Art. 106(2) TFEU), which provides a basis for exempting healthcare providers from competition rules (Hatzopoulos, Reference Hatzopoulos and de Búrca2005). In so doing however, the CJEU used ‘purely economic’ criteria in its assessment (2005: 159) and granted SGEI exceptions only on a case-by-case basis. As a result, it became ‘almost impossible to know in advance with any degree of certainty whether EU competition rules will apply at all, and, if so, between which entities and to what degree’ (2005: 160). These legal ambiguities allowed private healthcare operators and governments to instrumentalise EU competition law to promote the further commodification of healthcare systems (Kunkel, Reference Kunkel2021).

In the 2005 legislative package adopted in response to the Altmark court case (Chapter 8), the Commission clarified the exemptions to EU restrictions on ‘state aid’ (Art. 107 TFEU) if an undertaking is paid for fulfilling a ‘public service obligation’ (Directive 2005/81/EC). The package specifically exempted compensations for hospitals providing SGEI from the notification procedure. Seven years later, the 2012 Almunia package extended this exemption from hospitals to ‘health and long-term care more generally’ (Decision 2012/21/EU), but only if SGEIs are provided at a cost that reflects ‘the needs of an efficient undertaking’ (Hervey and McHale, Reference Hervey and McHale2015: 250). Thus, while largely exempting healthcare providers from state-aid rules, these packages opened arrangements for the compensation of public health services to the Commission’s and the CJEU’s scrutiny.

Member states’ capacity to use overriding reasons of general interest as grounds for shielding healthcare entities and activities from EU state-aid law depends on the degree of commodification of their health systems (Hatzopoulos, Reference Hatzopoulos and de Búrca2005). The opening up of ‘previously publicly owned and managed hospitals to the private sector’ and the more general experimenting ‘with changes to … health systems that involve the state acting as an economic operator’ (seen in the previous subsection) led to the increasing ‘likelihood that EU competition and free movement law will apply to hospitals within the health system’ (Hervey and McHale, Reference Hervey and McHale2015: 247–248, 235).

Since the late 1990s, the scope for plaintiffs who aim to further liberalise health services through litigation has increased. However, as the application of EU competition law to healthcare entities on a case-by-case basis remained very laborious, the Commission began to seek a more straightforward avenue for commodifying healthcare, namely, by proposing new EU legislation on public procurement and the freedom of movement of services.

Phase Three: Failed Frontal Commodification Assault and Return to Incrementalism

In a third phase, in the 2000s, the Commission added to its laborious, case-by-case approach to health services a legislative programme with an explicit commodification objective. This happened despite the Amsterdam Treaty explicitly shielding the organisation of national healthcare services from EU intervention. In 2006 however, Commissioner Bolkestein’s draft Services Directive (COM(2004) 2 final/3), which included health services, failed, given the unprecedented countermovements that it triggered. Subsequently, the Commission pursued an incremental healthcare commodification approach, for example with its 2008 draft directive on patients’ rights to cross-border care (COM (2008) 414 final) (see below). This mirrored its earlier approach to liberalising public network industries (see Chapters 8 and 9).

Creating a European market for health service providers: In a first step, Commission and CJEU activism brought procurement to bear more forcefully on health entities (Hatzopoulos, Reference Hatzopoulos and de Búrca2005). Until the 1990s, procurement directives did not explicitly mention health and only rarely included health bodies among contracting bodies. In 1998 however, a European court rulingFootnote ¹ confirmed that ‘healthcare entities are subject to the rules of public procurement’ (Hatzopoulos, Reference Hatzopoulos and de Búrca2005: 165). Subsequently, the Commission used the revision of public procurement directives as a more straightforward attempt to open public services, and thus healthcare, to market forces. This met with resistance from the European Federation of Public Service Unions (EPSU) and a social movements’ coalition (Fischbach-Pyttel, Reference Fischbach-Pyttel2017). As a result, the 2004 Procurement Directive (18/2004/EU) did cover ‘health and social services’ but only as non-priority services to which more flexible rules applied. The directive even so confirmed that public hospitals and healthcare authorities (Hatzopoulos, Reference Hatzopoulos and de Búrca2005) and ‘the purchase of devices and equipment within health systems’ may be subject to EU procurement rules (Hervey and McHale, Reference Hervey and McHale2015: 272).

Cross-border care offered another avenue for Commission and CJEU activism for a further commodification of health services. During the 1990s, the healthcare reforms triggered by the financial constraints discussed above increasingly framed patients as consumers in search of the best deal. Some patients thus came to seek reimbursement for cross-border care outside the scope of the social security regulations, through several CJEU rulings.Footnote ² In its rulings, the CJEU ‘established that there is no general exclusion for healthcare (or other welfare) services’ from provisions on the free movement of services (Hervey and McHale, Reference Hervey and McHale2015: 77, their emphasis). The rulings thus reframed access to cross-border care from an issue of collective solidarity (as in social security regulations) to one of individual patients’ rights. During the 2000s, the CJEU applied this viewFootnote ³ to various member states, ‘irrespective of the organisation of their health system’ (2015: 195). This is how a commercial route to cross-border care based on CJEU case law came to complement the social security route (Fillon, Reference Fillon and Jorens2009). Patients were now encouraged to adopt a consumerist approach and choose between having cross-border care reimbursed at rates in the country of destination using the social security route or at those in their home country, through the commercial route (Hatzopoulos, Reference Hatzopoulos and de Búrca2005).

To further liberalise healthcare, the Commission envisaged proposing new legislation (Hervey and McHale, Reference Hervey and McHale2015). In its Internal Market Strategy for 2003–2006, the Commission included ‘a well-managed application of Internal Market rules to the health care sector’ among its legislative priorities (COM (2003) 238 final). The strategy praised the benefits to patients and providers of cross-border care CJEU case law, as it would make ‘the most efficient possible use of resources across the EU’. In 2004, David Byrne, the then Health Commissioner, committed the Commission to ‘integrating health into the Lisbon agenda as a driver of competitiveness’ (Euractiv.com, 16 July 2004) and then stated, like his successor Markos Kyprianou one year later, that improving health should be regarded as an ‘economic priority’ (emphasis added) (Euractiv.com, 28 July 2005). Accordingly, the Commission included healthcare in its draft Services Directive. As outlined in Chapter 6, the directive reinterpreted the EC Treaty’s free movement of services provisions by the application of the country-of-origin principle. It also included provisions on the ‘assumption of costs of cross-border-care’ (Art. 23), which aimed to enshrine CJEU case law on cross-border care in EU law. The proposal also deemed the public financing of hospitals ‘irrelevant for the purposes of classifying such care as hospital care’ (Art. 4(10)). The intention was to give mobile patients the right to be reimbursed for care obtained abroad from both private and public providers by their home country’s public healthcare funds. As, however, shown in Chapter 7, an unprecedented transnational countermovement of a trade union–social movement coalition motivated the European Parliament and Council to remove health services from the remit of the 2006 Services Directive (della Porta and Caiani, Reference della Porta and Caiani2009; Crespy, Reference Crespy2016).

Creating cross-border patient markets: In response to the Commission’s activism to create a European market for health services, several states sought to oblige all EU institutions to mainstream health concerns across all EU policy areas and activities (Bartlett and Naumann, Reference Bartlett and Naumann2021) and to make the national competence for the organisation of health services more explicit. In response, the drafters of the Lisbon Treaty of 2007 added to the treaty’s public health title provisions that ‘a high level of human health protection shall be ensured in the definition and implementation of all Union policies and activities’ (Art. 168 (1) TFEU) and the recognition of ‘the responsibilities of the Member States’ not only ‘for the organisation and delivery of health services and medical care’ (as stated in the Amsterdam Treaty) but also ‘for the definition of their health policy’ (Art. 168(7) TFEU).

Undeterred by these provisions and by the Services Directive setback, the Commission continued in its attempts to build a European healthcare market, albeit by pursuing a more incremental, sectoral approach, as previously applied to the transport industry (Chapter 8), and proposed a directive ‘on the application of patients’ rights in cross-border healthcare’ (Cross-Border Care Directive). The proposal (COM (2008) 414 final) reinstated many of the provisions on the assumption of costs in cross-border care that were part of the draft Services Directive. In 2011, the European Parliament and Council adopted a slightly amended directive (2011/24/EU), responding to the extensive ‘rivalry’ between economic and health policymakers involved in EU healthcare policy (Vanhercke, Reference Vanhercke2016: 296), the tensions between solidarity-based and marketising approaches to cross-border care (Crespy, Reference Crespy2016), and the criticism of European trade unions via EPSU (Fischbach-Pyttel, Reference Fischbach-Pyttel2017). Tellingly, the treaty’s new health mainstreaming and national responsibility clauses, mentioned above, did not prevent EU policymakers from basing the Cross-Border Care Directive not only on public health (Art. 168 TFEU) but also on Article 114 TFEU, which sponsors EU legislation with the objective of the ‘establishment and functioning of the internal market’ as a legal basis for the new directive.

The directive has been described as ‘the first explicit measure to address the market’s role in health services’ (Brooks, Reference Brooks2016: 97) and a ‘prime example of liberalisation in healthcare’ (Crespy, Reference Crespy2016: 42). By allowing, in line with the draft Services Directive, public coverage of private cross-border care, it further develops the commercial route to cross-border care, notably in areas not shielded by pre-authorisation (i.e., non-hospital, low and mid-priced care, and day hospital care). This introduces competition between (domestic) public healthcare providers and (foreign) private ones, thus allowing horizontal market integration to exert pressure on public health services (Martinsen and Vrangbaek, Reference Martinsen and Vrangbaek2008; Greer and Rauscher, Reference Greer and Rauscher2011). On its web site, the Commission’s Directorate General in charge of the internal market tellingly called the Cross-Border Care Directive a ‘Medical Tourism Directive’ (European Commission, 2011), thus framing it as a tool for developing profit-oriented patient mobility. The directive, in fact, further commodifies access to health services, as it treats patients not only as citizens with access to (social) benefits but also as consumers in pursuit of the best deals (Baeten, Reference Baeten2012; Mainil, Reference Mainil2012; Crespy, Reference Crespy2016; Stan, Erne, and Gannon, Reference Stan, Erne and Gannon2021). Given patients’ need to pay upfront for travel and health services, the Cross-Border Care Directive furthermore favours better-off patients and those from richer states even more than the EHIC route to cross-border care discussed above.

In parallel with their work on the Cross-Border Care Directive, EU legislators adopted a new Insurance Directive (2009/138/EC). Although the directive ‘explicitly exempted social health insurance schemes from its scope’, it subjected supplementary health insurance ‘to the rules of the market’ (Hervey and McHale, Reference Hervey and McHale2015: 241); and, in 2011, the Commission renewed its attempt to bring healthcare more straightforwardly under EU procurement law. The ensuing 2014 Procurement (2014/24/EU) and Concessions (2014/23/EU) Directives for the first time explicitly mentioned health services in their body rather than just in their annexes. Following objections from EPSU (Fischbach-Pyttel, Reference Fischbach-Pyttel2017), healthcare was still framed as ‘services to the person’ to which a ‘light regime’ continued to apply (OECD, 2016: 4). This means that ‘Member States and public authorities remain free to provide those services themselves or to organise social services in a way that does not entail the conclusion of public contracts’ (Directive 2014/24/EU) or concessions (Directive 2014/23/EU) and that there is a higher threshold above which the notification procedure should kick in. Although, in this case, ‘liberalisation was accompanied by a fair level of re-regulation’ (Crespy, Reference Crespy2016: 105), like previously with the 2004 Procurement Directive, the new directives reconfirmed that public hospitals and national healthcare authorities may be subject to their rules (Hervey and McHale, Reference Hervey and McHale2015). Thus, these directives entail not so much decommodification as what we may call contained commodification.

In the 2000s, the Commission’s drive to promote the commodification of healthcare services became clearly visible. However, its bold attempt to create an EU healthcare market through its draft Services Directive failed dramatically. In response, EU executives used the EU’s ordinary legislative procedures more carefully to pursue incremental changes, for example through the Cross-Border Care Directive. The shift to the NEG regime after 2008, however, gave EU executives also new tools to pursue their commodifying policy objectives.

Provision of Healthcare Services

Resource levels: Most prescriptions under this category were issued for Romania and targeted both healthcare expenditure and the material infrastructure of hospitals. In 2010, the second update of the 2009 Memorandum of Understanding (MoU) tasked the government to ‘streamline’ the number of hospitals (MoU, Romania, 2nd addendum, 20 July 2010). Then, the Provisional MoU (P-MoU) of 2011 committed the Romanian government to ‘check that the aggregate figures for hospital budgets are consistent with the expenditure programmed’ (P-MoU, Romania, 29 June 2011: 9), a request reiterated one year later (P-MoU, Romania, 2nd supplemental, 22 June 2012). In 2013, the second P-MoU reiterated the request not only to rationalise ‘the hospital network’ and to streamline ‘hospital services’ but also to continue ‘the reduction of bed capacity in in-patient acute care hospitals’ and to shift ‘resources from hospital-based care towards primary care and ambulatory care’ (P-MoU, Romania, 6 November 2013).

Thereafter, NEG prescriptions for Romania repeatedly reiterated the request to ‘shift to outpatient care’ (Council Recommendations Romania 2016–2019).Footnote ⁴ Although this shift was to be accompanied by an increase in the primary care budget (P-MoU, Romania, 6 November 2013), it involved, in the context of a contraction in overall healthcare spending, a curtailment of hospital expenditure, favouring commodification. Moreover, these measures redirected resources to an already strongly privatised outpatient sector (Chivu, Reference Chivu2011), favouring commodification. Hence, Romania’s hospital sector and overall healthcare were heavily targeted by NEG’s prescriptions. Most of them occurred between 2010 and 2013 and had a very significant coercive power as they were included in the MoUs and their updates. The invitation in 2015 to remedy ‘low funding and insufficient resources’ in healthcare (Council Recommendation Romania 2015/C 272/01), although potentially decommodifying, not only obscured NEG’s previous resource-curtailing prescriptions for Romania but also had weak constraining power.

Ireland, Germany, and Italy also received one prescription each under the resource levels category. Thus, in 2012, the sixth update of the 2010 MoU tasked the Irish government to ‘eliminate the spending overrun’ in the health sector by the end of the year (MoU, Ireland, 6th update, 13 September 2012). The 2013 reiteration of this prescription was accompanied by the precise request to ‘contain health expenditure next year to within the €13.6 billion departmental ceiling for 2013’ (MoU, Ireland, 7th update, 25 January 2013). In turn, Council Recommendation (2013/C 217/09) asked the German government in 2013 to place a ‘stronger focus on prevention and rehabilitation and independent living’. This measure echoed the shift to outpatient care requested from Romania and was intended to shift resources towards an already heavily privatised homecare sector (Lutz and Palenga-Mollenbeck, Reference Lutz and Palenga-Mollenbeck2010). Both Ireland’s and Germany’s prescriptions point in a commodification direction. In turn, in order to ‘incentivise labour market participation of women’ (Council Recommendation Italy 2012/C 219/14), between 2012 and 2014 the Council RecommendationsFootnote ⁵ tasked the Italian government to increase the provision of long-term elder care. Although these prescriptions thus pointed in a decommodification direction, their coercive power was significant in 2012 and 2014 but weak in 2013. More importantly, as Italy’s system of elder care relies not so much on public as on private residential care (Basilicata, Reference Basilicata2021), measures seeking to increase long-term care provision usually favour private provision and, hence, commodification.

To these prescriptions directly targeting healthcare resource levels, we must add those targeting the public sector in general, most notably in terms of the curtailment of public spending, public sector wages, and employment levels (Chapter 7). Between 2010 and 2019 for example, the Italian government subtracted €37bn from the national health service (Servizio Sanitario Nazionale): €25bn between 2010 and 2015 through direct expenditure cuts and €12.11bn between 2015 and 2019 through reduced service levels (Cartabellotta et al., Reference Cartabellotta, Cottafava, Luceri and Mosti2019). Given the importance of healthcare in public spending and employment, the impact of these prescriptions on the sector has been considerable.

Sector-level governance mechanisms: The countries that received sector-level governance prescriptions are Romania, Ireland, and Italy. All these prescriptions affected the internal operation of the sector rather than the legal status of sector regulators and service purchasers.

EU executives tasked both Romania and Ireland to adopt measures seeking to tighten the government’s financial control in healthcare. As seen above, their 2011 P-MoU requested Romania to contain hospital expenditure by strengthening central control over hospitals budgets. In so doing, the P-MoU also shifted the location and rationale behind government control from the objective of improved health outcomes enforced by the Ministry of Health to the objective of financial discipline and cost-containment enforced by the Ministry of Finance. Thus, the Ministry of Finance was tasked to ‘take action’ so that ‘the aggregate figures for hospital budgets are consistent with the expenditure programmed’ (P-MoU, Romania, 29 June 2011; P-MoU, Romania, 1st supplemental, 14 December 2011). In 2012 and 2013, EU executives reiterated this request (P-MoU, Romania, 2nd supplemental, 22 June 2012; P-MoU, Romania, 6 November 2013). The second P-MoU spelled out more clearly the resulting ‘budget control mechanisms’, which were to include ‘improved reporting and monitoring frameworks, in particular with regard to hospitals’ and ‘monthly hospital budget reporting’ (P-MoU, Romania, 6 November 2013). In 2014, EU executives reiterated the need for tighter managerial controls in healthcare, highlighting the need for ‘proper management and control systems’ (Council Recommendation Romania 2017/C 261/22).

The Irish government also received prescriptions that called, like those for Romania, for tighter central managerial control over hospital and healthcare expenditure. In 2013, EU executives urged the Irish government to ‘streamline and consolidate multiple and fragmented financial management and accounting systems and processes’ (MoU, Ireland, 9th update, 3 June 2013; MoU, Ireland, 10th update, 11 September 2013), a request that was reiterated the following year (Council Recommendation Ireland 2014/C 247/07). The coercive power of the NEG prescriptions for the ministries of finance and public expenditure to tighten central financial control in the healthcare sector was very significant for both Romania and Ireland up to 2013 and significant for Ireland and weak for Romania thereafter.

In addition, EU executives tasked both the Irish and the Italian government to increase economic competition in the healthcare sector. The 2010 MoU committed the Irish government to ‘remove restrictions to trade and competition in sheltered sectors including … medical services’. This included primary care, as the government was tasked to eliminate ‘restrictions on the number of GPs qualifying’ and to remove ‘restrictions on GPs wishing to treat public patients’ (MoU, Ireland, 16 December 2010; 1st update, 28 April 2011; 2nd update, 3 September 2011). The prescription points to a move from one form of commodified provision of healthcare to another, namely, from a limited to a greater number of private GPs with national health service contracts. In turn, in 2016, Council Recommendation (2016/C 299/01) tasked the Italian government to ‘increase competition in regulated professions [and the] … health sector’. This prescription occurred in the context of repeated and more general requests for increased competition in ‘professional services’ (Council Recommendations Italy 2011/C 215/02, 2013/C 217/11), ‘services’ (Council Recommendations Italy 2012/C 219/14, 2018/C 320/11), and ‘all the sectors covered by the competition law’ (Council Recommendation Italy 2015/C 272/16). Prescriptions for both Ireland and Italy under this rubric fostered further commodification in healthcare. As shown in Table 10.2, their coercive power was either significant or very significant.

In addition to these more targeted prescriptions, the governments of Ireland, Germany, and Romania received more encompassing prescriptions with the common theme of increasing the cost-efficiency of their healthcare systems. They affected healthcare governance at both sector- and provider-level, but, for convenience, we classed them under the first, more encompassing category. These prescriptions occurred four times in the German (2011–2014), five times in the Irish (2014–2016, 2018–2019), and three times in the Romanian (2013, 2014, 2019) case, thus contributing to making this theme the most frequent one in our dataset of NEG healthcare prescriptions. Although their exact formulation varies across countries – ‘further enhance efficiency of public spending on healthcare and long-term care’ (Germany), ‘increase the cost-effectiveness of the healthcare system’ (Ireland), ‘improve cost-efficiency of healthcare’ (Romania) – these formulations are all linked to a common quest for cost-efficiency in the sector. As mentioned in Chapter 5, these prescriptions could be understood in two different ways: (1) as requesting an increase in the level of health services provided while keeping the level of expenditures constant or (2) as requesting the level of health services to be kept constant while reducing the level of expenditures. As prescriptions to increase the cost-efficiency of healthcare were semantically linked to the more concrete prescriptions discussed above and below that sought a curtailment of resource levels and structural reforms along marketisation lines (see also the discussion in Chapter 5), the commodifying direction of these apparently ambiguous prescriptions is very evident (see also Stan and Erne, Reference Stan and Erne2023).

Provider-level governance mechanisms: The two countries that received prescriptions under this category are Ireland and Romania. All these prescriptions concern the internal operation of providers rather than their legal status.

The first MoU for Romania already saw payment arrears of public healthcare providers to private suppliers as a key factor hindering financial discipline in public hospitals (MoU, Romania, 23 June 2009). In 2011, the third update of the 2009 MoU obliged the Romanian government to engage in ‘major action’ to prevent the re-emergence of arrears in the healthcare sector, a request reiterated in 2011, 2012, and 2013 (MoU, Romania, 3rd addendum, 19 January 2011; 4th addendum, 8 April 2011; P-MoU, Romania, 29 June 2011; 1st supplemental, 14 December 2011; 2nd supplemental, 22 June 2012; P-MoU, Romania, 6 November 2013). The payment of arrears meant redirecting the already scarce resources of public healthcare providers towards private creditors and away from supporting current services. It also consolidated the involvement of private healthcare operators and the increased marketisation of hospitals. The request to implement ‘e-health solutions’ (P-MoU, Romania, 6 November 2013) was also meant to facilitate this transformation, as it enhanced managerial control over expenditure at both provider and sector level. Moreover, as seen above, the 2013 P-MoU urged the government to increase the primary care budget, while simultaneously inviting it to make savings in the sector through the ‘use of performance-based payments’. This questions the decommodifying potential of the prescription to increase resource levels in primary care, as performance-based payments foster the commodification of health services by increasing competition among service providers (Friedberg et al., Reference Friedberg, Safran and Coltin2010).

In its turn, the Irish government had to commit to introduce a ‘case-based payment system for public hospitals’ (MoU, Ireland, 9th update, 3 June 2013; MoU, Ireland, 10th update, 11 September 2013). The 2014 Council Recommendation (2014/C 247/07) reiterated the need to ‘roll out activity-based funding throughout the public hospital system’. This meant aligning Irish hospital financing with the DRG method, which introduces competition both inside and between public healthcare providers and thus marketises their governance at both provider and sector level. Moreover, in 2013 and 2014, NEG prescriptions committed the government to implement ‘e-health systems’ (MoU, Ireland, 8th update, 12 April 2013; MoU, Ireland, 9th update, 3 June 2013; MoU, Ireland, 10th update, 11 September 2013) and to ‘roll out individual health identifiers’ (Council Recommendation 2014/C 247/07) needed to implement an e-health system. This is important, as effective e-health systems are needed for the operation of a case-based hospital financing system and for enhancing, more generally, central managerial control over both provider-level and sector-level expenditure, as we saw in section 10.2.

By contrast, there was no need to issue any commodifying prescriptions on healthcare services to the Italian and German governments. After all, they had already implemented crucial healthcare reforms before, including the introduction of the DRG method of hospital financing (see section 10.2).

Users’ Access to Healthcare Services

Coverage levels: Romania and Italy are the countries that received prescriptions under the coverage levels category. In 2013, Romania received a prescription affecting the scope of services covered by the National Health Fund, namely, to ‘define, by end-September 2013, the publicly reimbursable basic benefits package based on objective, verifiable criteria, to be financed within the limitations of available funding’ and to subsequently revise it ‘based on a cost-effectiveness analysis’ (P-MoU, Romania, 6 November 2013). This prescription basically tasked the government to reduce the scope of services covered by national health insurance. It resulted in some health services no longer being covered by the National Health Fund. Patients thus henceforth had to fund them by private means, thereby increasing the commodification of healthcare.

Romania received one prescription under the coverage levels category that points in a decommodification direction. In 2013, the Romanian government was asked to increase the ‘accessibility, in particular for disadvantaged people and remote and isolated communities’, to health services (Council Recommendation Romania 2013/C 217/17), a request reiterated in 2014, 2015, 2018, and 2019. This prescription had decommodifying potential, as it aimed to increase the range of population covered by the National Health Fund. However, it failed not only to define what ‘accessibility’ was supposed to mean but also to acknowledge NEG’s role in curtailing the level of Romania’s healthcare resources and patients’ service coverage levels. The prescriptions moreover failed to outline how to increase people’s access to healthcare in a context of diminished resources and service levels.

Italy received one prescription under the coverage levels category. Thus, after previously deploring the ‘limited availability of affordable care services’ (Council Recommendation Italy 2016/C 299/01: Recital 16), EU executives in the 2019 Council Recommendation (2019/C 301/12) urged the Italian government to improve not only, as between 2012 and 2014, the provision of long-term care, seen above under the resource levels category, but also access to it, as a way to support women’s participation in the labour market. Notwithstanding its decommodifying potential, its vague formulation eschews the question of the resources needed to improve access. This compromises its potentially decommodifying impact, just as in the case of the similar prescription for Romania. Moreover, neither the prescription for Italy nor that for Romania effectively mentions whether improved access involves the increased availability of public as opposed to private healthcare. This is significant, as, as we have already seen, both Italian long-term care and Romanian outpatient care had been significantly privatised already prior to the introduction of NEG. As shown in Table 10.2, the constraining power of the prescriptions with a decommodifying potential in this category was again weaker compared with the constraining power of commodifying prescriptions in this category.

Cost-coverage mechanisms: Romania is the only country that received prescriptions under the cost-coverage mechanisms category. Thus, Romania received two prescriptions that sought to balance cuts in public healthcare expenditure with increasing reliance on private means to cover the cost of public health services. In 2010, the second update of the 2009 MoU tasked the Romanian government to introduce ‘a co-payment system on medical service’ (MoU, Romania, 2nd addendum, 20 July 2010). This request was reiterated in 2011 (MoU, Romania, 3rd addendum, 19 January 2011; 4th addendum, 8 April 2011; P-MoU, Romania, 29 June 2011; 1st supplemental, 14 December 2011) and 2012 (P-MoU, Romania, 2nd supplemental, 22 June 2012). In 2013, the second P-MoU committed the government to ‘establish the framework for a private supplementary insurance market’ (P-MoU, Romania, 6 November 2013). The introduction of both co-payments and private insurance as cost-coverage mechanisms amounts to the marketisation of healthcare access, most notably by making the coverage of costs dependent on patients’ private means, hence favouring commodification.

Romania received two prescriptions on cost-coverage mechanisms that pointed in a decommodification direction. Thus, in 2013, the Romanian government was tasked to ‘adjust health insurance contributions’ (P-MoU, Romania, 6 November 2013) in a bid to reduce labour costs. The prescription was reiterated in the 2014 Council Recommendations for Romania. Although this reduction implied lower costs for patients, favouring decommodification, it curtailed the funds available to the National Health Fund, favouring commodification. In 2014, the government was asked to ‘curb informal payments’ in the healthcare system, a prescription that was reiterated in 2016 and 2017 (Council Recommendations Romania 2014, 2016, 2017).Footnote ⁶ Curbing informal co-payments in the public healthcare system reduces patients’ costs to access it; this points in a decommodifying policy direction. Successive Romanian governments, however, have used this prescription to justify a further privatisation of the healthcare system, which, instead of eliminating informal co-payments by patients, would have just formalised them (Stan, Reference Stan and Carrier2018). As shown in Table 10.2, the coercive power of the commodifying prescriptions in this category was again more significant than in the case of the decommodifying ones.

Pursuing a Healthcare Commodification Scrip through NEG Prescriptions

Our analysis shows that, overall, NEG prescriptions on healthcare favoured more often and more strongly commodification than decommodification. Not only were commodifying prescriptions more numerous, they were also more precise and had a stronger coercive power. In contrast, decommodifying prescriptions were fewer, vaguer, and weaker. At times, they accommodated commodification through the back door. Although the coercive power of NEG healthcare prescriptions decreased with the end of bailout programmes and countries coming out of executive deficit procedures, in 2015 the Annual Growth Survey still included health under ‘structural reforms’, signalling the ‘acceptance of the treatment of health as an economic sector’ (emphasis added) in the European Semester process (Brooks, Reference Brooks2016: 138).

The predominance of commodifying NEG healthcare prescriptions is noteworthy given the notable differences between the four countries under study. Our sample includes larger/smaller and richer/poorer states and states with different modes of healthcare financing. The four national healthcare systems had also been affected to differing degrees by prior commodifying reforms. Accordingly, NEG prescriptions targeted our four countries differently. We can thus describe NEG as a case of differentiated integration, but not in the usual sense of the opt-outs from EU legislation that aim ‘to accommodate economic, social and cultural heterogeneity’ (Bellamy and Kröger, Reference Bellamy and Kröger2017: 625). On the contrary, NEG seems to be a case of reversed differentiated integration (Chapter 3), which uses country-specific prescriptions to pressure reluctant states to accept policies seeking to boost the convergence of health policies along the lines of an overarching commodification policy script.

The nature of this script becomes apparent when one tries to understand why NEG targeted different countries differently in terms of the number and coercive power of commodifying healthcare prescriptions. To account for this, different modes of healthcare financing across countries do not seem to matter, as the two states most targeted by NEG (Ireland and Romania) finance their public healthcare systems differently. Whereas Ireland finances its healthcare system (like Italy) directly out of the state budget, Romania’s health system is funded (like in Germany) through pay-roll tax contributions. Given NEG’s dual aim to curtail both public spending and unit labour costs, it is hardly surprising to see that those different modes of healthcare financing did not matter in NEG’s approach to healthcare.

Our analysis shows instead that the different ways in which NEG prescriptions targeted member states depended on their progress on the path towards healthcare commodification before 2008. In all four countries, governments had already adopted commodifying healthcare reforms before the EU’s shift to NEG, albeit to different degrees. The countries most heavily targeted by NEG (Ireland and Romania) were also those where healthcare commodification, most notably in the hospital sector, lagged behind compared with those less targeted by it (Germany and Italy).

Pre-NEG private for-profit hospitals came to play an important role in Germany and Italy: by 2008, they accounted for 40 per cent of the total number of hospitals in Germany and 54 per cent in Italy (OECD, 2020). In contrast, in the same year, 18 per cent of hospitals were private for-profit in Ireland (Mercille, Reference Mercille2018) and only 5 per cent in Romania (Romair Consulting, 2009: 8). Ireland was also the only country in our dataset that by 2008 had not yet adopted the DRG method of financing hospitals. NEG prescriptions for Ireland and Romania sought to accelerate the commodification of health services in these two countries not only by targeting healthcare expenditure (in common with pre-2008 fiscal governance) but also by directly prescribing the marketisation of health service governance. The result was, amongst others, a rise in the importance of private for-profit hospitals. By 2017, 19 per cent of Ireland’s hospitals were private for-profit (Mercille, Reference Mercille2018), whereas a staggering 36 per cent (representing a 9.5-fold increase from 2008) were so in Romania (INS, 2018). These findings are not of academic interest only, as the curtailment of public hospital beds and the rise in private for-profit hospitals negatively affected member states’ capacity to respond to the Covid-19 pandemic.

The way in which NEG healthcare prescriptions targeted each of the four countries under study therefore responds to NEG’s agenda to advance healthcare commodification across member states by accelerating it in countries where it lagged prior to NEG’s advent. Because it is doing this, we may say that NEG uses country-specific rules to promote convergence towards an overarching transnational script of healthcare commodification. Thus, because they display a common logic in their deployment across countries and time, commodifying NEG healthcare prescriptions participate in an overarching policy script.

However, although most NEG prescriptions in healthcare follow a commodification script, some of them point towards decommodification. To assess whether decommodifying prescriptions manage to challenge the commodification script, we need to map the larger policy rationales that inform their formulation. In healthcare, decommodifying prescriptions are semantically linked to four policy rationales: enhance social inclusion, reduce payroll taxes, expand labour market participation, and improve efficiency.

The two latter rationales point to larger commodification agendas deployed, respectively, in the cross-sectoral areas of employment and public services. In turn, the rationale of reducing payroll taxes points in a decommodifying direction, but only partially. Indeed, as we have seen above, it is linked to a prescription to adjust healthcare contributions, which also involves an overall reduction in collected healthcare funds, and hence commodification.

The only rationale that more clearly points in a decommodifying redistributive direction, and can be understood as reflecting social policy actors’ attempts to alter the dominant commodifying orientation of NEG documents, is that of enhancing social inclusion. This rationale was invoked in relation to the inclusion of disadvantaged groups and low-income earners in several prescriptions issued for Romania, namely, to increase access, adjust healthcare contributions, remedy low funding, and curb informal payments in healthcare. However, even this conjunction between decommodifying prescriptions and a more clearly decommodifying policy rationale does not manage to make decommodification an alternative script informing NEG prescriptions in healthcare. Indeed, two of the four prescriptions in this set are also informed by commodifying rationales (increase efficiency); and the only prescription that seems to hold on to a purely decommodifying agenda (increase access) has consistently had poor constraining power (Online Appendix, Figure A10.4). Thus, decommodifying prescriptions were backed by policy rationales that either served commodifying agendas or, if not, did not have significant coercive power. We thus conclude that decommodifying prescriptions, although present in NEG documents, were subordinated to, rather than challenged, the dominant commodification script.

Overall, EU executives’ NEG prescriptions and legislative agendas in healthcare reveal a striking continuity of policy preferences. Since the 1990s, EU legislation on cross-border care has shifted from a decommodifying to a commodifying approach, whereby patients have been increasingly conceived of as consumers and EU executives have increasingly understood healthcare providers as commercial undertakings. Furthermore, the multilateral surveillance regime set up in view of the single market, EMU, and accession processes led governments to adopt a series of commodifying healthcare reforms. When the Commission wanted to commodify health services in a more straightforward way however, it failed, as the European Parliament used its role in the EU’s ordinary legislative procedure to exclude health services from the scope of the Services Directive. By contrast, the country-specific methodology of NEG and the Parliament’s self-inflicted exclusion from the formulation of NEG prescriptions allowed EU executives to issue NEG prescriptions in healthcare that went ‘far beyond the mandate intended in the founding treaties’ (Brooks, Reference Brooks2016: 110).

Horizontal market and vertical political integration pressures have played an intertwined role since the outset of EU health policymaking. European executives’ creation of the European internal market and EMU amplified horizontal market integration pressures, leading national executives to adopt commodifying healthcare reforms in turn. This not only increased the exposure of health services to EU competition and free movement law but also amplified private cross-border patient mobility (medical tourism) and the rise in healthcare corporations (Lethbridge, Reference Lethbridge2013). Transnational healthcare corporations grew most in states where healthcare commodification was already proceeding apace before the EU’s shift to NEG, for example in Germany and Italy. The more they grew in size, the more political clout they gained, which they and their organisations (e.g., European Union of Private Hospitals) used in strategic legal battles and the lobbying of national and EU institutions (Kohler-Koch and Quittkat, Reference Kohler-Koch and Quittkat2013) – incidentally, not with the aim of fully privatising health services but rather for private for-profit providers to gain access to public healthcare funds (Stan, Reference Stan and Carrier2018). The predominantly commodifying policy orientation of EU executives’ healthcare governance interventions by law (see section 10.2) or NEG prescriptions (see above) attests a convergence between them and the interests of transnational healthcare corporations. But how have trade unions and social movements reacted to them in turn? We turn to this issue in section 10.4.