EU: The EU services directive has become a political monster, with the left claiming it will lead to 'social dumping', writes Denis Staunton in Brussels.
Critics call it the Frankenstein directive, after the arch-liberal former internal market commissioner Frits Bolkestein who hatched the EU's plan to liberalise the market in services. As EU leaders met in Brussels last night to agree an action plan to boost Europe's economy, the services directive appeared to have become a political monster gone out of control.
Trade unions and left-wing politicians throughout Europe have identified the directive as the biggest threat to workers' rights in the EU. Business groups and liberal politicians insist it is essential if Europe is to realise its economic potential.
German chancellor Gerhard Schröder last month summed up the popular attitude to the plan in many continental European countries. "The content of the directive puts fear and horror into the hearts of people," he said.
The directive, which was approved by Romano Prodi's commission early last year, aims to create a single EU market in services, similar to the internal market in goods.
Services account for two-thirds of the EU's economy and for 70 per cent of European jobs. Service providers seeking to operate across national borders face numerous restrictions, however, including incompatible systems of professional and trade qualifications and consumer standards.
At the heart of the liberalisation plan is the "country of origin" principle, under which service providers - from hairdressers to builders and accountants to electricians - could operate throughout the EU according to the rules in force in their home country.
Critics fear this principle is a licence for companies to base themselves in EU countries with the lowest wages and weakest labour-protection laws. They argue it would lead to "social dumping" - pushing down wages and conditions in richer countries under pressure from cheap labour from poorer states.
Charlie McCreevy, who took over as internal market commissioner last November, has acknowledged the directive is unacceptable in its current form. He has told MEPs, who are now considering the plan, that he would welcome amendments to ensure it does not lead to social dumping and to clarify the operation of the "country of origin" principle.
Mr McCreevy also promised to exempt healthcare and other public "services of general interest" from the plan, in order to dispel fears that the directive could lead to the privatisation of public services. The commission president, José Manuel Barroso, said last week the commission would consider how the "country of origin" principle should be applied, but he ruled out abandoning it altogether.
"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.
Last Saturday tens of thousands of trade unionists marched through Brussels in protest against the directive. But the biggest political shock came this week with an opinion poll showing a clear trend against the EU constitution in France.
With opposition to the constitution growing on the political left, French president Jacques Chirac fears the unpopular directive could derail the referendum due on May 29th.