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Last Updated: Wednesday, 23 March, 2005, 01:33 GMT
EU agrees to reform services plan
French President Jacques Chirac
Jacques Chirac said the services directive must be rewritten
European Union leaders have agreed on the need for a "far reaching" revision of controversial proposals to free up Europe's huge services sector.

French President Jacques Chirac earlier told an EU summit in Brussels that the planned changes were "unacceptable".

It follows fears the plans may endanger workers' rights and lead to job losses.

Mr Chirac could face a humiliating loss in France's 29 May referendum on the EU constitution, with the No vote fuelled by protests over the services proposal.

EU leaders announced they would seek to rewrite plans to liberalise Europe's services sector shortly after Mr Chirac voiced his opposition.

Social rights

The proposals would create a free market in anything from computer services to construction.

Swedish Prime Minister Goran Persson said: "There is agreement to have a far reaching revision of the proposal which is in line with the social European model.

"We all realise there is a need for a services directive."

Mr Chirac said it was indispensable for the European Commission to "completely start from scratch" on the proposal to throw open business across the EU's 25 member states.

He told EU leaders at the two-day summit on economic reform that the directive must be reworked to "respect social rights and public services".

We need to open up the services sector in Europe... but it must be done with respect for certain sensitivities
Jean-Claude Juncker
Prime Minister of Luxembourg
The plan as it stood was "unacceptable for France, as it is for other European partners", he said, including Germany, Sweden and Belgium.

Critics believe it could result in companies shifting staff to cheaper bases in Eastern Europe, undercutting large EU economies and undermining social protections.

There are also concerns workers from eastern European countries will flood into the west, exacerbating the already high unemployment levels in Germany.

Luxembourg's Prime Minister Jean-Claude Juncker, chairing the EU summit, agreed the current proposal needed amendments.

'Humiliation' warned

"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," he said.

"Changes will be made to take the social model into account."

Danish Prime Minister Anders Fogh Rasmussen said his country was among several which would join forces to demand changes to the services directive.

French No campaigners, Versailles, 28 Feb 05
The services plan has fuelled French opposition to the EU constitution

The French government earlier warned of "humiliation" for the nation if, as two recent polls suggest, voters reject the EU constitution in a referendum on 29 May.

EU Commission chief Jose Manuel Barroso has said the French government should explain the constitution to voters.

"What the French are going to vote on in this referendum is not the directive on services... It is up to French politicians to explain this," he said on Monday.

The constitution project - a wide-ranging blueprint to streamline the enlarged EU's institutions - was spearheaded by former French President Valery Giscard d'Estaing.

France's No campaigners argue the new constitution will pave the way for Turkish accession to full EU membership - something most French people strongly oppose.

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