European Social Model vs Directive Bolkestein

In this article is elaborated the actually question which is developed and discussed it the European Union is the European Social Model (ESM). It is a vision of society that combines sustainable economic growth with ever-improving living and working conditions. This implies full employment, good quality jobs, equal opportunities, social protection for all, social inclusion, and involving citizens in the decisions that affect them. As the Euro-zone is struggling to move away from a dramatic slump in its economy, and while the Lisbon Strategy and its potential for economic growth, strongly needs reactivation, the debates over the Europe have raised again the issue of a sustainable social agenda for the European Union. Recently, Europe’s political leaders defined the ESM, specifying that it “is based on good economic performance, a high level of social protection and education and social dialogue”. An important topic of the discussion nowadays is the Directive of the European Parliament and of the Council on services in the internal market so called “Bolkestein directive”. The importance of this article is to give us the answer to the following question: would we have French goods available in French supermarkets all over Poland and no Polish services allowed in France? The EU would be unthinkable without the full implementation of the four freedoms. This is a good directive, going in the good direction.


European Union and the modernization of the European Social Model
A political question: is there a European social model?The European Social Model 1 is a vision of society that combines sustainable economic growth with ever-improving living and working conditions.This implies full employment, good quality jobs, equal opportunities, social protection for all, social inclusion, and involving citizens in the decisions that affect them.In the ETUC's 2 view, social dialogue, collective bargaining and workers' protection are crucial factors in promoting innovation, productivity and competitiveness.This is what distin-guishes Europe, where post-war social progress has matched economic growth, from the US model, where small numbers of individuals have benefited at the expense of the majority.Europe must continue to sustain this social model as an example for other countries around the world.Inevitably when trying to define the notion of a European Social Model one must refer to the transatlantic debate, and the simple contrasting statement that European states have welfare systems while the United States (US) does not.In fact, this notion stems from the broad acknowledgement of three common features, shared by every European state: a certain public commitment to social justice, however differently defined in accordance to national traditions, the theoretical approach that social justice is not opposed to economic efficiency, and should eventually contribute to it, and the value of interest representations and negotiations between the social actorswith, there again, a various degree of appreciation, from the pattern of conflicting societies such as Italy or France to the Scandinavian model of comprehensive negotiations3 .The whole could as well be summarized in the versatile but significant notion of a social and economic dimension of citizenship 4 .
As the Euro-zone is struggling to move away from a dramatic slump in its economy, and while the Lisbon Strategy and its potential for economic growth, strongly needs reactivation, the debates over the Constitution have raised again the issue of a sustainable social agenda for the European Union (EU).The successive and ominous failures for the ratification of the European Constitutional Treaty in France then the Netherlands, two major, founding, members, may or may not endanger Europe's integration process, yet they undoubtedly questioned the current state of the European project in the very name of a European Social Model.In many aspects, the debates have reviewed and revolved around contrasting visions, and around the bitter statement that a common vision for Europe was definitely missing.Moreover, in letting the argument focus on the confrontation between "liberal" and "social" dimensions of the project, as if the two options had to be mutually exclusive, scores of traditional supporters of the European integration felt at odds with the Treaty and drawn to vote it down.To be sure, the temptation to see the European Social Model as the expression of a truly European essence is entirely and foremost political.For some, the Social protection Systems remain an indefectible "civilization acquis" 5 which should be preserved, even at increasing costs; others would emphasize the link between social cohesion agendas and an overall citizen support, for any further step in the European integration process 6 .Yet at the bottom of these political questions lies a rather strictly economic issue.Namely the sustainability of many welfare states, notably in the western part of the EU is jeopardized by the current economic and demographic trends: increasingly ageing population, low participation rate in the labor market or too generous social benefits, to name just a few.Furthermore some drastic discrepancies between the systems of "old" and "new" member states are pleading for a further integration in the different labor markets and increased cross border mobility of workers.This is why the issue of a European Social Model could stand today as a priority, as a need to embed the future legitimacy of the European integration in a strengthened European social cohesion.
Europe's political leaders recently defined the European social model, specifying that it "is based on good economic performance, a high level of social protection and education and social dialogue" 7 .This definition authenticated a process which initially peaked in the Lisbon strategy 8 , launched in March 2000, when the EU's Heads of State and Government defined Europe's strategic goal "to become (by 2010) the most competitive and dynamic knowledge based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion" 9 .The paradigm10 of the European Social Model is that economic, employment and social policy form a policy "triangle" in that they should mutually reinforce one another.This positive interaction should create a virtuous and sustainable cycle of economic and social progress.With the Lisbon strategy on economic and social renewal, employment and social affairs became firmly anchored in the core business of the EU, validating the gradual shift from being a complementary issue of European economic integration to operating in the centre of EU policy making 11 .
In the context of the Lisbon process which intends to root future growth into a knowledge-based economy, the five following items should be given full dedication: 6 Bot Bernard, Minister of Foreign Affaires of the Kingdom of the Netherlands.more restrictions on public expenditures reform of social security systems -foremost of a pension system financial balance, with namely limits on health expenditures lower tax rates but with less exemptions more balanced mix between public/private services During the Presidency of the Netherlands of the European Union in 1997, the concept "social policy as a productive factor" was presented, succinctly sums up the rationale: "If social cohesion and stability are thus recognized as productive resources, then surely the contradiction between social justice and economic efficiency breaks down.Social policy can then no longer be perceived as leading to consumption related benefits, taken out of an efficient economy by distributive politics.Social policy itself becomes a productive resource which, instead of countering economic policy by protecting or "decommodifying" labor, comes to play a part in improving the economy's performance potential.From this perspective, social policy and economic performance are closely, perhaps even indissolubly, interconnected"12 .
The 2004 enlargement was unprecedented with regards to the number of new countries entering the EU as well as the large gap in the standard of living between the EU-15 and the new Member States.The average income per head of the ten new member states13 was well less than half of the average income level in the EU-15.Also the employment rate, still low with 64.3% in 2002 for the EU-15 was reduced to 63% for the EU-25; as the ten new Member States reached an employment rate of 62.4%, taking the enlarged EU even further from its 70% employment target.Therefore also the enlargement itself, which increased diversity in the EU, inspired a rethink of the Lisbon strategy and its policy orientations, to ensure that the goals meet the ambitions of all Member States14 .
The data in graph 1 show the employment and unemployment rates for EU countries.The gap to be bridged to meet the headline Lisbon goal of an overall 70% employment rate remains large.The total employment rate in the EU in 2003 had reached 63%, while the employment rate for women had increased to 55.1% (with 60% as Lisbon target) and the employment rate for older workers (55-64 year olds) went up to 40.2%, a far stretch from the 50% target.Unemployment has reached more than 9%, which equals close to 20 million people.As the table shows, the aggregate data conceal the wide-spread variety between countries and suggests that sluggish economic or poor employment performance cannot be brought back to a simple comparison between for instance the EU and the USA.It also shows the scope to learn from one another's experiences and practices in the EU.

Graph 1 -Employment and unemployment data Employment (wide column) and unemployment (narrow column) rates 2002
Source: Eurostat

Directive Bolkenstein in the internal market of the EU: facts
The Directive of the European Parliament and of the Council on services in the internal market so called "Bolkestein directive" 15 is evidently an important topic of the discussion nowadays.It is important to answer to the following question: would we have French goods in French supermarkets all over Poland and no Polish services allowed in France?The EU would be unthinkable without the full implementation of the four freedoms.This is a good directive, going in the good direction.
The Directive on services in the internal market (commonly referred to as the "Bolkestein directive") is an initiative of the European Commission aimed at creating a single market for services within the EU, similar to the single market for goods already present.Drafted under the leadership of the former European Commissioner for the Internal Market -Frits Bolkestein, it has been popularly referred to by his name.It is seen as an important kick-start to the Lisbon Agenda which, launched in 2000 16 , is an agreed strategy to make the EU "the world's most dynamic and competitive economy" by 2010.With the proposed legislation, the Commission wants to reduce the barriers to cross-border trade, principally by doing away with the service industry regulations of individual EU member states, unless those regulations are non-discriminatory; objectively justified on the grounds of public interest; and proportionate.The Commission argues that regulations which do not meet these criteria are unnecessary and pose a barrier to service providers wanting to provide services in other member states in addition to their country of establishment.The "Bolkestein directive" was harshly criticized by the left wing, who stated that it would lead to competition between workers in different parts of Europe -hence the expression "Polish plumber" -resulting in social dumping.Unfortunately, the debate has sometimes taken on xenophobic and protectionist overtones, such as the noise about "the Polish plumber", which became connected not only to EU enlargement, but to the Directive as well.This leads us to a number of questions, namely, what people propose instead and how the EU without the Directive would resolve the problems of labor disparities.
The directive, which would remove barriers to the provision of services between member states, is most often criticized for its "country of origin principle".Under this principle, companies which are registered in any EU member state may not only provide services in any other, but also can employee workers to perform such services abroad remaining subject to the law of the country in which they are registered.It is feared that businesses will utilize this law to take advantage of less strident labor and environmental standards in countries with more relaxed standards.An inevitable race to the bottom is bound to occur.
The Bolkestein directive would mean that a firm registered in an EU member state could operate in another member state and yet follow the laws of the country in which it was registered, leading to competition between workers from different parts of Europe.Major employers see big advantages in this in terms of the downward pressure it would exercise on wages and social provision.The fact that many people took to the streets of Brussels makes it clear that trade unions will not tolerate the neoliberal policies emanating from that same city, policies based on "economic progress, social decline".
The Directive proposes several important changes in the EU services market.These can be grouped into three interrelated pillars: "freedom of establishment" -this means that if a company or individual is able to provide a service in one EU country, should they wish to provide the same service in another member state, there should be little, if any, legal or administrative restrictions on them doing so i.e. they should be free to set up shop in any other member states in the same way as a company or individual is able to in his/her member state of origin."country of origin principle" -this is a rule that would facilitate the free movement of service providers on a temporary basis to encourage cross-border competition or, more specifically, to encourage individuals or companies to test other markets without first having to establish.What makes this different from the "freedom of establishment" is that the company or individual may provide services to consumers in another member state on the basis of the laws of its country of establishment (origin) and without registering with the regulators in the host member State.In practice, this would mean that a company providing services in France (established there), for example, would be free, for a limited period, to provide services in the UK under French laws; or, as discussed at length in France, a Polish Plumber could work in France under Polish labor laws."mutual assistance" -this third component is designed, in part, to support the first two pillars: particularly the country of origin principle.Proposals include measures to promote "mutual assistance" between member states for enforcement purposes; harmonization measures with respect to consumer protection and other measures to promote and uphold the quality of services.In order to transpose the Directive, member states must: simplify the administrative procedures and formalities eliminate from their legislation a number of requirements listed in the Directive that hamper access to and the exercise of service activities guarantee in their legislation the free movement of services from other member states and adapt any rules that would difficult such movement evaluate the justification and proportionality of a number of requirements listed in the Directive which, where they exist in their regulations, may significantly restrict the development of service activities.Main points: The European Commission's controversial draft Directive on Services aims to remove all barriers to the cross-border provision of services in the EU.In doing so, it will reduce member states' control over working practices, open the door for companies to bypass labor and environmental standards, impose barriers to state regulation, and put private pressure on public services.
The Directive is wide-ranging, including all types of service sector.It effectively treats all sectors of the services industry the same -regardless of whether they are protected, public services monopolies in some member states.
The freedom of establishment for service providers and the so-called 'country of origin' principle will undermine regulation of the labor market in the service sector.It would create a downward spiral as companies re-establish themselves in other countries to avoid labor standards.
The Directive will create strong pressure for service liberalization as it becomes incumbent upon governments to justify regulation of the service sector.The Directive would make it difficult for governments to introduce new regulation of service sectors, placing a number of restrictions including giving the Commission a veto on new legal provisions.Chronology 13 January 2004 European Commission issues its draft directive on services in the internal market January 2004 The European Parliament calls for a legal framework to define services of general interest (SGIs).

March 2004
The ETUC Executive Committee adopts a resolution welcoming moves aimed at making the internal market function more efficiently and promoting the free circulation of services, but drawing attention to the lack of proper consultation in drawing up the draft directive and warning that some of the proposed measures would threaten workers' rights and conditions, and damage the quality of services in the EU.

June 2004
The ETUC Executive Committee hardens its opposition to the Bolkestein Directive as growing evidence from national affiliates illustrates the potentially damaging impact of some elements.16 February 2006 European Parliament plenary supports a compromise agreement meeting the majority of ETUC demands: labor law is excluded, and in particular issues linked to the posting of workers sensitive sectors such as temporary work agencies and private security services are excluded fundamental rights to collective bargaining and action are respected services of general interest and some services of general economic interest, such as healthcare, are excluded the country of origin principle has been abolished, enabling Member States to exercise better supervision and apply rules to protect the public interest.
The draft directive applies to all services offered to companies and consumers, ranging from advertising, recruitment, including employment agencies, to trade, cleaning services and construction, but with the exception of certain transport sectors (+3.5 tons), telecommunication, financial services and services directly offered by the government at no charge.With the exception of the police service, legal system (not lawyers) and the armed forces, no public services whatsoever would be free.The directive is consequently also applicable to public services.Accordingly, health, education, culture, audiovisual media, the services of the local authorities, etc. will also be regarded as pure merchandise that are fully dependent on the laws of the market, without account being taken of their specific character and their social aims.It is unacceptable for services as diverse as architect's firms and hospitals to be treated in the same way.
Changes made to the directive include exemptions for public healthcare (but not private), broadcasting, postal and audiovisual services, temporary employment agencies, legal and social services, public transport and gambling.The Directive, however, still covers services of "general public interest" (public services in ordinary language), including, but not limited to, water, sewage and waste management.The heavily criticized "country of origin principle" was explicitly left over, but there was no "country of destination principle" to replace it either.The European Court of Justice would therefore be charged of deciding, through jurisprudence, which country's labor laws apply themselves in each case.Business groups stated that the new Directive will limit the benefits that the early version of the Directive would have provided.The European Commission estimated that this early version would have created an additional 600,000 jobs in the EU, would have boosted economic growth and would have increased quality and choice for consumers.However, this was contested by left-wing and labor organizations, who underlined that the new version wasn't as favorable to workers as it pretended to be, and that the "country of origin principle" would probably be applied by the European Court of Justice, as a record of its preceding decisions led believe.They especially pointed out that member states were prohibited from demanding any type of administrative authorization to companies, thus making control of labor laws close to impossible.
The Bolkestein directive has provoked intense debate and mass protests various EU countries, including France, Belgium, Sweden and Denmark.On 21 March 2005 nearly one hundred thousand marched in Brussels to protest the Directive.The crowd was primarily working people and trade unionists from Belgium, France, Germany, Italy, and the Netherlands18.
Critics argue that the Directive will erode many of the member state regulations governing industry and the environment, and lead to competition between workers in different parts of Europe, resulting in a downward spiral in income levels.The expression "Polish Plumber" became famous during the French debate about the directive, meaning that under this new legislation, a Polish plumber could work in France under Polish labor laws.Critics also charge that the Directive is a sign that "Anglo-Saxon" style economics are running rampant over the EU, and they warn that the directive will lead inevitably to "social dumping" companies and jobs relocating to the low-cost and less regulated economies of Eastern Europe19 .
The Directive is controversial because it applies the same rules to healthcare and social services as it does to estate agents, fairground providers, advertising companies and private security firms.The commission no longer sees the services provided by doctors to patients as a special public good to be enjoyed by all citizens, but as an "economic activity", a commodity to be traded across the EU much like any other.
On February 2006, a plenary session of the European parliament carried out its first reading of the Directive in Strasbourg.On February 16, 2006, MEPs  voted 391-213 in favor of the Directive.
At last, mobility in the service sector will be possible thanks to the directive without having to fear excessive red tape and several other obstacles.The approval should undoubtedly bring a well needed boost to the struggling economic activity in the EU.However several Europeans still opposed the directive stating diverse reasons.
After numerous protests from opponents of the Bolkestein directive, a softer version had been adopted, submitted to the parliament's vote and approved.At first, the directive contained the country of origin principle which meant that workers were subject to the laws of their countries, causing heated debates.The country of origin principle was dropped, as well as other laws that were considered too liberal, as part of concessions made to those opposing the directive.Still although concessions were made, a great number of opponents, who mainly identify themselves as politically on the left and far right, thought the directive was too liberal and fear that it would result in an ultraliberal Europe where welfare and social benefits would be cut.
Let's face the current situation: the Bolkestein directive was adopted as part of the Lisbon strategy, designed to help Europe become the "Worlds most dynamic and competitive economy by 2010".Halfway thorough the deadline, Europe is nowhere near there.Therefore, should Europe put forward economic growth or preserve its reputation as a welfare continent at all costs?Well it can do both.Initially an ultraliberal draft, it was softened as several sectors considered as "sensitive" including public services health and social services were excluded from the final text which was written by German socialist MEP Evelyne Gebhart.The rest should encourage economic growth, as all texts discriminating companies are now illegal.However, as to balance things up, any company that may cause security or environmental problems are excluded from the Directive.
The text may help Europe go through its current economic deadlock, there are still people opposing it.What do they have to say?
A direct consequence of the genuine market will also be a more competitive position within the negotiation related to the GATS treaty of the World Trade Organization (WTO).Even more, the Directive can be considered as a sort of "GATS-treaty of the EU".
Services total 70% of Europe's GDP.One can say that the Directive will affect the EU's economic structure in many ways.To some, it's for the best and to others for worse.Indeed, before the text was adopted, hundreds demonstrated in front of the European Parliament in Strasbourg, France.They stated that the directive would jeopardize the European social model by encouraging social dumping.They also fear that local companies would start outsourcing to other EU countries where fiscal laws are lighter than in their home country, which would cause the opposite effect to that expected by the directive: job creation.They therefore demand that fiscal laws should also be harmonized, avoiding unfair competition.Yet, Europe was all about reducing barriers to transcontinental trade, it is therefore up to each country to design a fiscal policy that would encourage investors to establish themselves.And then Europe would march on.

November 2004
At the European Parliament Internal Market and Consumer Protection public hearing, the ETUC warns MEPs that fundamental amendments must be made to the draft.November 2004 ETUC and CEEP (European Centre of Enterprises with Public Participation) issue a joint statement to the EU Competitiveness Council, calling for a more balanced approach to protecting public services and social welfare, taking account of the diversity of the services in question.March 2005 ETUC assembles over 75,000 people on the streets of Brussels to demonstrate their opposition to the draft directive.22 March 2005 EU leaders, led by France, agreed on a "far reaching" revision of the Services Directive to preserve the European social model.French President Jacques Chirac told an EU summit in Brussels that the changes planned by the Directive were "unacceptable".However, modifications to the Directive will be introduced within the normal course of the EU legislative process, at a later stage.The Directive will not disappear from the pipeline because the leaders agreed on the need to "open up" the EU services sector.April 2005 MEP (Member of European Parliament) 17 Evelyne Gebhardt presents her report on the draft to the European Parliament IMCO Committee (Internal Market and Consumer Protection Committee), proposing the exclusion of labor relations and services of general interest.May 2005 European Parliament Employment Committee votes in favour of amendments from MEP Anne Van Lancker, including reversal of the Country of Origin Principle.November 2005 ETUC affirms its strong disapproval of the outcome of the vote by the IMCO Committee, which fails to take on board some important changes to the draft.