MEPs debate new law on services

Unions from 20 of the 25 member states sent protesters to Strasbourg

A controversial attempt to liberalise Europe's services sector has been debated in the European Parliament.

The services directive would remove barriers to cross-border competition, and could create up to 600,000 jobs.

But MEPs are split on whether to allow a company to operate in another state under the regulations of the country where it is based.

During the debate, tens of thousands of unionists demonstrated in the streets of Strasbourg against the directive.

Suspicion

The aim of the directive is to inject new competitive life into a sector which accounts for half the EU's economic output and more than two-thirds of its employment.

European Commission President Jose Manuel Barroso appealed to MEPs to back the directive, saying: "I can't see anything more social than creating quality jobs."

The idea somehow there's a licence for companies not to observe the laws of the country in which they are trading, that's a step too far John Monks, European TUC Q&A: Services Directive Mark Mardell's Europe diary

But it has aroused fears among member states such as France, and among the unions and the left, that there could be a "race to the bottom" - that high standards of protection for workers and consumers would be undermined.

Last week, the two largest political groups in the parliament agreed to water down the principle of home-country regulation - also known as the country of origin principle - in order to secure a large majority for the legislation and to push suspicious EU governments to accept it.

However, there have been recent signs that the deal could be unravelling, leading to lengthy behind-the-scenes negotiations.

'Bizarre rules'

The UK Secretary State for Trade and Industry, Alan Johnson, told BBC Radio 4's Today programme that "bizarre rules" in some countries needed to be changed.

"You know, in one member state the distance between opticians has to be fixed at 350 metres, in another member state there's a limit of one driving school per every 1,500 people...

"These are rules set up to prevent competition in that country. We've swept them away on goods, so we need to sweep them away on services."

The General Secretary of the European TUC, John Monks, told the same programme that his members disagreed with the country of origin principle.

"The idea somehow there's a licence for companies not to observe the laws of the country in which they are trading, that's a step too far and I think it's anti-democratic."

Compromise

However, Mr Monks backed the compromise agreed by centre-right and centre-left MEPs last week - despite the calls from trade union demonstrators for the legislation to be scrapped.

Those are very wide terms - if 'social policy and consumer protection' are included, we'll vote against Marek Siwiec, Polish Socialist MEP

He warned hard-left MEPs in Strasbourg that if they voted against the compromise, a more free-market version of the directive may be approved.

The compromise rejects the country of origin principle, and gives governments the right to put obstacles in the path of foreign service providers, if they are necessary to protect consumer rights and social policy.

It has been condemned by some MEPs on both right and left.

A number say the terms "consumer rights and social policy" are too broad, and have threatened to vote, on Thursday, against any amendment couched in this language.