LAST week’s decision by European leaders to roll back ambitious plans to open up the continent’s services market was taken to save the French referendum on the European Union treaty from defeat. Despite the hopes of Jacques Chirac, the French president, the proposals aren’t dead — only resting.
Changes were made to a controversial EU directive that would allow architects, plumbers and other service providers to sell their services freely across Europe. Considered a vital motor for boosting stagnant economic growth, the initiative has fallen foul of the French who are concerned it will exacerbate the country’s 10% unemployment rate.
The EU’s two-day spring summit was supposed to be devoted to discussing ways of creating jobs and raising output. Instead, the debate was hijacked by attempts to give Paris leeway on the services liberalisation proposal in an effort to smooth the passage of the EU treaty referendum scheduled to take place on May 29.
The services industry accounts for 70% of Europe’s gross domestic product and is essential if Europe is to become a global player on a par with America. Reform could create 600,000 new jobs, according to a European commission study.
Although France, with its strong services sector, should be a beneficiary from the legislation Chirac described the move as ultra-liberalism, calling it “the new communism” over dinner with EU leaders.
Bertie Ahern was more circumspect. “He (Chirac) said he was a socialist and I welcomed him to the club,” the taoiseach quipped.
The proposal establishes the country of origin principle where a company can sell its services across the bloc if it meets the conditions in its home state. The EU used the same mechanism to open up the goods market in 1992. France fears the draft law will spark an exodus of firms to low-cost countries in eastern Europe with lighter social and employment laws.
French opposition to the so-called Bolkestein directive has fed into the “no” campaign building up against the EU treaty. If France, a founding member of the EU, rejects the charter it would lead to a Europe-wide crisis.
About 60,000 workers, mostly French trade unionists, demonstrated in Brussels last week, calling for the services plan to be scrapped. Pro-business campaigners, however, say the fact that EU leaders did not ditch the draft at the summit despite French pressure, was a positive sign.
“The directive was not withdrawn,” said Paul Hofheinz, the president of the Lisbon Council. “The amendments they are talking about would have taken place anyway.” EU leaders agreed that the draft law should preserve Europe’s “social model”.
Under the EU’s legislative system, the European commission proposes laws while the European parliament and EU states revise the bill before reaching a compromise. This procedure will go ahead as planned with the European parliament set to give its first opinion in July.
Charlie McCreevy, the European commissioner with responsibility for the internal market, is in charge of the draft. He has already admitted that “it won’t fly” in its current format. McCreevy is willing to exclude health and public services from the proposal to calm fears.
Known for his combative style McCreevy was taking a low-key approach to the draft until he was stung by negative press coverage earlier this month following a disagreement with a German colleague.
Günter Verheugen, a European commission vice-president, said McCreevy should be doing more to sell the benefits of the proposal and then leaked his views to the media, provoking a predictable response.
“There are people who like to speak out of both sides of their mouth on this particular issue,” the former Irish finance minister told a hastily convened press conference, referring to Verheugen’s vacillating support for the draft bill.
McCreevy had urged caution, saying it would be better to wait until the French referendum was over before launching a campaign to sell the services plan. Moving too quickly could see it torn to shreds. “It is not my intention to end up with a services directive that has so many exclusions and exemptions that it’s not worth the paper (it) is written on,” he said.
Alasdair Murray of the Centre for European Reform, a London-based think tank, said EU disarray over the services directive is sending out a negative signal. “There’s no doubt that this is a setback for liberalisation,” he said.
Murray pointed out that McCreevy held a “nuclear option” that would allow him to scrap the proposal completely if it was deemed worthless after the changes.
While all eyes will be on France over the next two months, the European parliament is working on finding a consensus on the directive. Parliamentary officials fear there could be up to 1,000 amendments to the proposal, potentially making the revised draft unworkable.
Though the EU assembly has a centre-right majority, it is impossible to predict how the vote will go. Sophie in ’t Veld, a Dutch Liberal MEP, is one of the few outspoken supporters of the draft. “I hope the supporters will come out of the closet,” she said.
The 10 predominantly central and eastern European states who joined the EU last year want to remove barriers to free trade in the services market in contrast to older members such as Denmark, France, Germany, Luxembourg and Sweden who fear it will undermine employee rights.
The newcomers are prepared to wait for the bill to be adopted despite the discriminatory tone of the debate.
“The situation for the new member states can only get better, and not worse, and this is why I am patient,” said Mikulas Dzurinda, the Slovak prime minister The head of the European Trade Union Confederation, however, hailed the summit as a victory for workers’ rights. “This services directive would have freed up people to come into Ireland who were registered somewhere else, market lower charges and take work away from local business,” said John Monks, its general secretary.
While Ahern supported the draft he is also aware of the political realities. “I’m glad it’s not dropped,” he said, adding that he hoped the amendments would ensure social cohesion and encourage competitiveness.
