Global Economics

Brussels Salvages Weakened Services Law


EU ministers have given the green light to a controversial law to open up Europe's services sector, despite a last-minute attempt by new member states to push through some pro-market measures.

"With great satisfaction I can tell you that we were able to reach a breakthrough on the services directive in the council," Austrian economics minister Martin Bartenstein told journalists late Monday (29 May), after hours of debate with his EU colleagues.

The disputed legislation aims to boost cross-border competition in services - a sector accounting for up 70 percent of Europe's economy.

Its original version, introduced about two years ago by ex-commissioner Frits Bolkestein, sparked strong opposition and is believed to have influenced French citizens to vote against the EU constitution last year.

But the European Parliament agreed some crucial changes to the legislation and the EU executive re-drafted it in the same manner, in a bid to protect what was frequently termed in Monday's debate a "fragile compromise."

Mr Bartenstein commented that it was quite symbolic for EU ministers to reach a crucial agreement on the directive exactly one year after the French referendum which sparked a crisis still unresolved over the bloc's future institutional reforms.

"The services directive is a symbol of new power and new initiative in Europe which will make it possible for people that make decisions - including social partners - to bring Europe forward," he said.

EU internal market commissioner Charlie McCreevy added "Few people would have believed last autumn that by May this year we would have a deal on the table."

He said that the agreed version is so close to the draft adopted by parliamentarians that the last legislative steps should be a mere formality.

FIGHT UNTIL LAST MINUTE. However, most of "new" member states - with the support of Luxembourg and the Netherlands - tried hard to break away from the limits set by the parliament and push through some last-minute modifications to allow more liberalisation of the sector.

Apart from a set of technical and legal details, they wanted to delete a provision stating that member states can protect their national sectors from foreign services providers where it is crucial for public policy, healthcare and environment protection.

MEPs scrapped the controversial "country of origin" principle in February, which would have allowed companies to offer services across borders according to their home country laws and replaced it with a general rule stating that member states cannot discriminate against foreign services providers who are free to trade their business across Europe.

The countries form central and eastern Europe also supported more stringent procedure for screening of national legislation by EU governments, in a bid to put pressure on them to avoid protectionist and discriminatory laws.

"We have lost the country of origin rule from the original proposal, so we are fighting for other ways to keep the directive pro-liberal," said Slovak deputy economics minister Laszlo Pomothy.

And the Austrian moderator of the debate, Mr Bartenstein, admitted "I understand their reasons," but stressed that some paragraphs of the draft legislation were simply "untouchable" as they would not have made it through parliament.

As only some cosmetic changes were made to the final agreement, most of the countries put their weight behind the compromise, with only the Lithuanian delegation abstaining.

The directive will be put to a second reading in the European Parliament and then member states will have three years to put it into practise.


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