An article by Chresten Anderson with Elaib Harvey in Strassburg and Paul Belien in Brussels

Yesterday the European Parliament, in plenary session in Strassburg, adopted the Services Directive. It only did so, however, after having drastically watered down the original directive, which was a proposal by the former European commissioner Frits Bolkestein. Mr Bolkestein wanted to liberalize the European markets by granting individuals and businesses the right to provide services throughout the EU. This was opposed by the Left in the Western welfare states with the argument that it would lead to “social dumping” and to wage cuts as “Polish plumbers” would swamp the West and companies would re-establish themselves in countries with less regulation and lower wages.

The definitive directive, which was approved yesterday, had removed Mr Bolkestein’s “country of origin” principle. This principle would allow companies to provide services in all EU member states according to the rules and regulations in their home countries. The scope of the services directive was also restricted by excluding social services, health care, security and transport services, and temping agencies.

The text adopted yesterday is the result of a compromise between the two biggest groups in the European Parliament, the centre-right EPP-ED and the socialist PSE. The Services Directive had been reshaped by a combination of the EPP/ED leader, Hans-Gert Pöttering (a German Christian-Democrat) and Martin Schulz, the German leader of the Socialist Group. British Tory MEP, Malcolm Harbour and Belgian Christian-Democrat Marianne Thyssen had been given the task of reaching a compromise with the Socialists. The problem is that the Socialists and the two nominal free marketeers both knew that the EPP wanted a deal at any cost. Hence the Socialists demanded and got the complete castration of the directive. What one can learn from this is that MEPs can change their points of view very quickly. Only a few days ago Mr Hans-Gert Pöttering had declared: “We do not want to see a compromise at any cost,” adding that every day lost in adopting the free movement of services means “less competition, less growth and less employment.”

The centre-right claimed victory yesterday, but so did the left. Mr Harbour said “Three quarters of the amendments that reshaped the proposal came from our side, in close cooperation with our [liberal] ALDE and [right-wing] UEN allies.” At the same time, however, the Socialist leader Schulz stressed that the compromise package effectively killed Bolkestein’s services directive.

While the centre-right MEPs say that the directive is still alive and well, the litmus test is – as usual – to see what the French are saying. The centre-right support for the compromise came from a minority of centre-right MEPs, namely those from France, Belgium, Germany and Austria. The view of deputies from the new member states and from Scandinavia is that the directive has been watered down too much. The French Socialists on the contrary hint that they still think the compromise is too liberal [i.e. too favourable to free-market principles].

After the vote Eastern European MEPs from the EPP/ED vented their dissatisfaction with the Franco-German backed stitch up of the Services Directive. They wrote the following joint declaration (and remember this is them being diplomatic):

The Czech, Estonian, Hungarian, Latvian, Lithuanian, Polish and Slovak EPP-ED Delegations in the European Parliament wish to express their disappointment on the dilution and weakening of the Services Directive. The founding Treaty of Rome already included the principle of the free movement of services, and the draft Services Directive raised hopes that after 50 years this freedom will finally be attained. However, the text adopted by Parliament today has sadly been bereaved of some of its most fundamental parts. In particular, it is unacceptable that the Directive leaves serious restrictions on the freedom of the posting of workers – a freedom without which no real competition can emerge in the services market. It is regrettable that many in the European Union seem only to be advocates of competition in words, but not in deeds. It remains our clear opinion that the services market of the EU must be opened up to competition if we are serious about achieving the Lisbon goals, boost the growth of our economies and create jobs. We do not think that the current version of the Directive is sufficient to achieve that. Therefore, further steps must be made for a better Services Directive in the coming months.

Jan ZAHRADIL, MEP - EPP-ED Czech Republic
Tunne KELAM, MEP - EPP-ED Estonia
József SZÁJER, MEP - EPP-ED Hungary
Valdis DOMBROVSKIS, MEP - EPP-ED Latvia
Laima ANDRIKIENÉ, MEP - EPP-ED Lithuania
Jacek SARYUSZ-WOLSKI, MEP - EPP-ED Poland
Zita PLESTINSKA, MEP - EPP-ED Slovakia

At the EPP group meeting German and French speakers had dominated the hour and a half session with Mr Pöttering in the chair. Othmar Karas, another German, was given the floor for twenty minutes at the start of the meeting and another five to wrap up. Speaker after speaker accused the eastern Europeans of “lack of gratitude.” All opponents were given no more than a minute each to voice opposition. They were all bunched together in a 20 minute block. At one point the Chairman even said, and I paraphrase, “You Poles need to be grateful to Germany and to me personally, if it wasn’t for my work on the Parliament’s enlargement Committee you wouldn’t even be here.” At the end of the discussion, when everybody expected a vote he said, “Well it seems we all agree,” and went on to the next item on the agenda.

While some Eastern Europeans are beginning to complain that they are second class citizens, only there to provide markets for the EU’s economic lebensraum, the European Commission welcomed yesterday’s vote. The Commission will now begin to work on preparing a modified proposal based on the vote in the European Parliament. The end result will most likely be that necessary reforms, especially in sectors such as health care and temping agencies, will be delayed indefinitely.

The press is also sceptical about the compromise. The Daily Telegraph wrote today:

Bolkestein has been gutted, first, by the removal of one of its three pillars, the country of origin principle. That would have allowed, say, the notorious Polish plumber to offer his services on a temporary basis in France operating under the laws of his own country. In other words, it would have enabled an entrepreneurial artisan from a relatively low-cost economy to test the waters of a west European market without having formally to register there.

Second, the Euro MPs have excluded from the directive a wide range of services from healthcare to public transport. And governments can cite public security or environmental factors as reasons for banning foreign service providers.

All this has been done in the name of protecting the European “social model” from the scourge of “Anglo-Saxon” competition.

The Guardian, a leftist, but “Anglo-Saxon,” newspaper, was critical too:

Reformist talk of creating a more dynamic Europe in a competitive 21st century global market is all very well. This classic compromise will do only a little to help achieve it.

The editorial of the German conservative and Eurosceptic Die Welt argued that the compromise on the Services Directive quashes almost every step towards liberalisation:

The directive is in danger of mutating into a bureaucratic monster, provoking endless legal conflicts between service providers and EU member states.

 

The watering down of the Services Directive is part of a plan by Angela Merkel, the German Chancellor and leader of that country’s Christian-Democrat party, to which Mr Pöttering belongs, to create more goodwill towards the EU among the citizens of the West European welfare states. The intention is to persuade the French and the Dutch to vote in favour of the European Constitution in 2007, when new referendums will be forced on the countries that rejected the Constitution last year.

See also:

Walesa Deplores Dishonesty of the Socialist West, 31 August 2005

Merkel Will Force Constitution on Europe, 23 December 2005