The European Commission president, Jose Manuel Barroso, has publicly backed Charlie McCreevy's offer to amend a controversial plan to liberalise the EU market in services but promised that the proposal would not be watered down to the point where it became "decaffeinated".but not abandoned

In a speech to the Lisbon Council, a Brussels think-tank that campaigns for economic reform, Mr Barroso ruled out abandoning the "country of origin" principle, under which service providers could operate throughout the EU on the basis of rules in force in their home countries.

"The heterogeneity of services means that it would be totally impracticable to legislate for each service. Likewise, the very different provisions in each member state would make harmonisation very difficult. Therefore, if we are to have a single market for services, it will have to be largely on the basis of the country of origin principle, but with appropriate guarantees," he said.

Mr McCreevy, the internal market and services commissioner, agreed earlier this month to consider amendments to the services directive that would exempt healthcare and some other services of general interest and to ensure that the country of origin principle did not lead to "social dumping".

France and Germany have been strongly critical of the directive, drawn up by Mr McCreevy's predecessor, Frits Bolkestein.

Trade unions fear the directive could encourage companies to establish in EU countries with low levels of labour protection and drive wages down throughout the EU.

Mr Barroso yesterday welcomed "the vigour and intensity" of the debate surrounding the services directive in many European countries.

"It shows that democracy in Europe is alive and well and that the emergence of a European public opinion directed towards a European issue is in the making," he said.

The commission president insisted, however, that economic studies commissioned by national governments and the European Commission were unequivocal about the economic benefits of opening up the market in services.

"While productivity improvements would lead to some job losses in certain sectors, total net employment in the EU would rise by some 600,000.

Real wages in the EU would rise by 0.4 per cent, while the price of services in the EU would fall - by an average of 7.2 per cent in the regulated professions.

"These are concrete gains we would all benefit from. I will not apologise for trying to realise them," he said.