Politicians erode EC
BRUSSELS – European Union leaders were seeking a new recipe, in their meeting last Tuesday and Wednesday, to revitalize the European economy, which has been sluggish for four years. But the news on two of the most important EU fronts for achieving that aim is dubious. The first is the now famous Bolkestein Directive (named after the Dutch former commissioner who introduced it) on freeing up the provision of services in the EU along the lines of the loosening the internal market for goods that was implemented a decade ago – and later withdrawn under pressure of the opposition it sparked. The opposition focused on one of its basic provisions: that businesses in the service sector should be able to operate throughout Europe, but would be governed largely by the law of the country in which they are based. The directive contained specific exceptions, both for the protection of workers’ rights and for entire «sensitive» sectors, such as transportation and health. But when governments began the ratification process recently, there was widespread opposition and allegations that it would lead to «social dumping» by the EU. The fear is that it will spark a general movement of service sector businesses to the new member states, as is already happening with certain areas of the industry. Much has been said about the Bolkestein Directive in the past few weeks. It is thought that beginning the process now has had a negative effect on the referendum for the European constitution (which is unrelated to the directive) now being held in France. It is one of the many ironies of Europe today that Germany, which avidly promoted the enlargement of 10-member Europe, is leading the fight now for the greatest possible restriction to benefits that new members can expect upon accession, from long transitional periods before their citizens can freely set foot on German soil to the idea of freeing up the provision of services. Seeing the anger of the trade unionists, the leaders of France and Germany practically competed in their displays of public indignation and demanded the radical revision of the directive. Under pressure from the French and Germans, as well as from a broadly based opposition, the directives supporters beat a hasty retreat, led by the hitherto cheerleader of neo-liberalism, the European Commission, which promised to reexamine the entire bill. In order to avoid confusion, the conclusions document specifically states that «the internal services market must be fully functional, while retaining the European social model,» and notes that «in the light of ongoing dialogue, from which it emerges that the present formulations of the draft directive do not completely meet requirements, the European Commission asks that every effort be made to arrive at a broad consensus that corresponds to all these objectives.» In short, the directive is being withdrawn until later notice. The Stability Pact Something similar has happened to the Stability Pact, for completely different reasons and probably with different results. This granite monument to fiscal discipline has proved over time to be extremely sensitive to economic events and to the political events they produce. The solution was sought in a revision of the pact. After 12 months of discussions and a 12-hour meeting on March 20, the EU’s economy ministers politicized the pact in the sense of making its basic provisions, as to who, when, if and how to punish someone for huge deficits, subject to the judgment of governments and not set in written, inviolable rules. The notion of explicit rules that are almost automatically implemented clashes with the reality of governments facing implacable economic problems without easy solutions and without being able to play with interest rates (which are now set by the European Central Bank), which has made the revision inevitable. The significant elements of the revision are the extension of time limits for bringing deficits below 3 percent: from 12 to 24 or 48 months; the curtailment of the European Commission’s role; and the corresponding reinforcement of the discretion allowed to governments in dealing with countries whose deficit is above 3 percent but not excessively so. But the most important of all is undoubtedly the main political aspect of the revision – the clear bolstering of the role of governments at nearly all stages of the process for implementing or withdrawing the pact, both by directly transferring responsibilities from the Commission to the Council, and by introducing a series of mitigating circumstances that will permit (relatively mild and short-term) violations of the 3 percent deficit limit.
