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EU lawmakers approve hotly-contested services reform

The vote lifts the last major obstacle to a reform, which has for three years fuelled an often firey debate about how much cross-border competition Europe should have in its vast service sector.

‘The European Parliament has put an end to three-year debate on a directive that ... inflamed a lot of emotions in the EU,’ the assembly’s president Josep Borrell said.

He voiced satisfaction that a result had been found that allowed a ‘balance between opening up services and respecting social norms’.

Following Wednesday’s vote, the plans still have to be formally approved by member states, which is expected before the end of the year. Members will then have three years to adopt the new rules into their national legislation.

Although the services sector generates at least half the EU’s economic activity and 60 percent of its jobs, it is still organised largely along national lines, unlike the market for goods, which is subject to fierce cross-border competition in Europe.

The European Commission has long argued that reform was necessary to boost competition, which would in turn fuel faster economic growth and more jobs.

‘It is undeniable that the services directive is an essential element in our efforts to boost the European economy and unleash the potential of the internal market for services,’ Internal Market Commissioner Charlie McCreevy told members of the European Parliament in a debate ahead of the vote.

McCreevy said the reform would provide ‘a real added value’ to the internal market by cutting red tape, removing barriers and improving legal certainties for businesses ranging from estate agents to car rental companies and architects.

Although the plans sailed smoothly through the parliament in the second reading, earlier forms proved deeply controversial.

Known in previous drafts as the Bolkestein directive after the former internal market commissioner Frits Bolkestein of the Netherlands, the original plans proposed that companies offering services in the EU be allowed to operate under the laws and regulations of their country of origin.

But many western European countries and trade unions feared that companies from countries with fewer taxes and regulations, in particular in eastern Europe, would be able to operate in higher-cost economies without paying their employees the local rate.

Critics warned the directive would lead to ‘social dumping’ -- companies and jobs relocating to eastern Europe or using low-cost labour in jobs like construction throughout the rest of the European Union.

Anti-globalisation and left-wing demonstrators took to the streets in France, Germany and Greece to oppose the reform and opponents of the EU’s draft constitution cast it as a threat to workers’ jobs in France ahead of the country’s rejection of the charter in a referendum in May last year.

The European Parliament in February threw out the original draft and approved their own watered-down version with the offending country-of-origin principle axed.

They also reduced the scope to cover mainly commercial activities and not services such as healthcare and security, which are deemed to benefit the public good.

Borrell acknowledged that the reform had travelled a bumpy road and stirred up clouds of controversy on the way. ‘From the outset this directive was the source of a great deal of fear and concern in our societies in Europe,’ he said.