EU gives workers freedom to move

Posted in Europe | 17-Feb-06 | Author: Graham Bowley| Source: International Herald Tribune

Polish plumber Ryszard Walkowicz holds a piece of pipe at an apartment in Warsaw.
STRASBOURG Europe opened its doors wider to the symbolic Polish plumber Thursday when, in a historic vote, the European Parliament approved a law allowing service companies new freedoms to operate their businesses across borders.

But the decision was greeted with protests by EU deputies from Central and Eastern Europe and from business interests after the law was weakened to meet the demands of trade unions.

The vote did not end the maneuvering over the measure, as Socialist deputies claimed victory in winning safeguards for West European workers' jobs, and business groups attacked sweeping amendments that they said had severely restricted the new rules.

During a fiery two-hour voting session of the Parliament in Strasbourg, many deputies from Central and Eastern Europe abstained or voted against the directive, complaining that their business people would still be frozen out of richer West European countries. The law was adopted by a smaller-than-expected margin of 394 votes to 215, with 33 abstentions, and it still requires approval by national governments.

"Our entrepreneurs are not welcome in old member states' markets," said Valdis Dombrovskis, a member of the Parliament from Latvia.

The law is one of the most important pieces of EU legislation in the last 10 years and was meant to remove national barriers to businesses from computer programmers to crane operators, and to promote competition and growth in the services sector, which is an increasingly important part of the European economy.

But following protests in countries such as France and Germany, the Parliament in the vote Thursday dropped a politically contentious clause that would have allowed companies to operate under the rules of the country they come from rather than those of the country they work in - the so-called country of origin principle.

Instead, governments are now charged with ensuring "free access" to their markets and warned against discrimination.

After deputies voted through nearly 15 pages of amendments, governments were given powers to block outside businesses on broad grounds such as being a danger to the public interest or a threat to a country's social policy.

The law also exempts large sectors of the economy that are deemed sensitive, such as health care, social services, public transportation and gambling

"We have turned this directive upside down," said Evelyne Gebhardt, a leading German Socialist member of Parliament. "We have managed to focus on the social protection of our citizens and our member states."

Supporters of the law said it still represented a concrete step forward since under the new rules companies would no longer be required to establish a separate subsidiary when they expand into another country.

Governments would also have to provide an administrative "one-stop shop," including electronic registration, so companies would not have to trail around different areas of local bureaucracy, which companies had complained was a serious deterrent.

The law is seen as fulfilling one of the four key pillars of the European Union's founding principles. While EU law currently ensures relatively free movement of people, capital and goods, service companies face many obstacles to movement across national European borders.

"This is a long-awaited moment," said Malcolm Harbour, a British Conservative member of Parliament who helped fashion the compromise. "This is clearly going to deliver significant benefits to European business."

But Harbour was criticized for giving in to leftist pressure, which had been especially forceful from German political leaders in the Parliament, to water down the law. Following the approval of changes Thursday, the European Trade Union Confederation said the vote was a "real victory for European workers."

But business leaders said the vote was a missed opportunity for significant reform of European economies, modernization that they said the EU needed to catch up with faster-growing economies such as the United States and China and India. Unice, the European business group, said the law had lost "most of its capacity to create growth and jobs in Europe."

Philippe de Buck, the Unice secretary general, said the law "would open the door for new restrictions on services trade" and create new legal uncertainties for companies. Some leftist and Green members of Parliament voted against the law because they said it had not been watered down enough.

The law's original central clause, the country of origin principle, had provoked fear among West Europeans of a flood of cheap labor from former Communist countries in Central and Eastern Europe that many believed would undermine wages and social standards in countries such as Germany and France.

Those fears played a role in voters' rejection of the EU's constitutional treaty in France and the Netherlands last year.

Since then, even some of the strongest supporters of economic liberalization in Europe have appeared to want to put the services directive behind them - even in a diluted form - in order to end the division it caused between countries.

The law now goes to the European Commission in Brussels, which must draft a new version based on the Parliament's decision before submitting it to national governments for approval, likely later this year.

Charlie McCreevy, the EU internal market commissioner, said the vote had provided "a solid basis for going forward."

"This represents a real advance, a step that no one would have believed possible just 12 months ago," McCreevy said.

Martin Bartenstein, the Austrian economy minister, who will be responsible for obtaining approval of the law by EU governments, since Austria currently holds the EU's rotating presidency, said: "It is a compromise. There are some saying it reaches too far and others saying it is not reaching far enough. It avoids the country of origin principle although the contents of the principle remain there to a high degree."