According to Bloomberg News, Piraeus Bank S.A. sold its 9.9% stake in the Athens Water Supply and Sewage Co. (EYDAP) to the New York hedge fund founded Paulson. The shares for the company reportedly were purchased by Paulson & Co. for 86.3 million euros.
 
By making the purchase it would appear that the hedge fund is banking on the privatisation of EYDAP moving ahead. The government has stated that, come 2015, it will sell its 61% share in the listed company which is estimated to have a market value over one billion, in order to help meet its revenue target of 2.2 billion euros from the sale of state assets.
 
Yet the planned privatizations of EYDAP and EYATH (the Thessaloniki water provider) are particularly controversial, given that in Europe and abroad the current trend is to move away from privatizations of water suppliers. Cities including Paris and Berlin have already re-municipalized their water suppliers after privatisations led to increased costs and poorer services, enraging the public.
 
Given the poor record of private water companies in these two European capitals – as well as numerous other countries – it appears the height of hypocrisy for the troika to demand the privatization of Greece’s water suppliers in return for Greece’s bailout funds. The European Commission is under increasing pressure from campaigns to recognize water as a human right, not a commercial good. Already the Commission has stressed that its latest Directive on concession contracts does not impose privatisations of water companies on member states. “The proposed Directive will not lead to forced privatisation of water services. Public authorities will at all times remain free to choose whether they provide the services directly or via private operators,” the Commission wrote in a press release. Unless, apparently, they are recipients of bailout funds.
 
Currently for EYDAP, its privatisation hinges on a decision by the Hellenic Council of State which has been called to rule on the legality of the transfer of the shares in the state-owned company to the Hellenic Republic Asset Development Fund (HRADF). By law assets that are passed to the HRADF must be privatised, however the court may rule that the initial transfer violated the constitution.
 
Given this backdrop, the investment by the Paulson hedge fund in EYDAP is noteworthy. While the 86 million euros may be a drop in a bucket for the 22.8 billion dollar hedge fund, clearly the fund’s analysts see potential for profits from the deal, presumably banking on the fact that the privatisation will go ahead. It should however be noted that the fund has a recent history of failures as well as successes. One Paulson & Co. fund recently lost half of its value when it underestimated the recovery of the US economy. The fund also predicted a Greek eurozone exit and break-up of the euro in 2012.
 
The sale of the EYDAP shares also raises questions for Piraeus Bank and the Hellenic Financial Stability Fund. The bank initially acquired its stake in the water company when it bought the ‘good’ part of the bankrupt Agricultural Bank of Greece in 2012. That deal, overseen by the HFSF, saw all of the Agricultural Bank’s assets pass to Piraeus Bank for 95 million euros including the water company shares. Now that cost has almost been entirely recouped by Piraeus bank with the sale of just its EYDAP stake, seemingly supporting the case made by critics of the original deal that Piraeus Bank was effectively gifted numerous valuable assets.