The European Union badly needs more economic reform. The trade in goods between EU members has soared by a third since 1992, the beginning of the single market. But trade in services had not increased at all. Yet services account for 70% of all employment in the EU.
The proposal for deregulation of the services sector passed a unanimous European Commission in March 2004. The services directive, often named the 'Bolkestein directive' after the former Commissioner who first sponsored it, was born.
A year later, Josι Manuel Baroso, President of the new European Commission declared the services directive still absolutely necessary despite critical voices from such heavyweights as French President Jacques Chirac and German Chancellor Gerhard Schrφder don't understand this sentence. 'Today, the greatest unexploited potential for the EU clearly lies in services', Baroso said on March 14 in a speech to the free-market Lisbon Council.
Baroso cited studies showing that the directive could create 600.000 jobs in the EU while cutting the costs of services provided by regulated professions by more then 7%. This plan for deregulation could start new and necessary economic expansion in the EU.
The directive also forms a key plank in the Commission's strategy to revive the Lisbon agenda, which aims to bring the EU to a more competitive position with the United States and Japan by the year 2010.
Baroso strongly defended the cornerstone of the directive, the 'country of origin' principle, despite fears it could hit jobs, wages and social standards in richer member states.
But in the meantime the "anti" movement became stronger and stronger profiling "social dumping" as the effect of the 'country of origin' principle. Unions, leftwing politicians (the Socialist group in the European Parliament for instance) and anti-Europeans ('no more influence from Brussels please') united across the EU. They renamed the 'Bolkestein directive' in 'Frankenstein directive'.
The most experienced of the EU leaders, Luxemburg Prime-Minister Jean-Claude Juncker, who currently holds the EU presidency, said ahead of the European Summit (21-22 March) of EU-leaders, that 'nobody can sensibly dispute the fact that we need to open up the services sector in Europe. But it must be done with respect for certain sensitivities and convictions'. And he said: 'We could never vote in favour of the text in the state it is in the moment'.
And that exactly was what happened. The Summit agreed to far-reaching changes of the draft Services directive and asked for more competitiveness and more social cohesion. The debate will be continued ... but not resolved before the Constitution!
The effect of the Bolkestein/Frankenstein directive
A qualified Greek painter moves to Belgium and begins to sell his services. What taxes will he pay? What salaries for his employees? Which labour laws will apply?
According to the (draft) services directive the painter could pay Greek taxes, pay his staff Greek wages and can stick to the less stringent Greek labour laws. That will make him much cheaper than his Belgian competitors.
Free market supporters will be happy: more choice and lower prices for Belgian consumers. Belgian companies are forced to decrease their prices.
On the other hand: Belgian painters start losing work, have to fire employees, even have to close their business.
Another possibility: a Belgian painter goes to Greece, qualifies himself there and comes back to Belgium to sell his services under Greek conditions.
Either way, in Belgium the Greek qualified painter has to pay local taxes and charges and abide by local rules.
