EU Service Industry Shake-Up

While parliamentarians hailed the compromise found on liberalization and workers' protection, business associations warned the services directive will not create new opportunities.

After massive protests by unions and left-wing demonstrators, the EU institutions have watered down the original proposal to open up EU internal markets for cross border service providers.

Many member states like France and Germany feared that companies with lower taxes and fewer regulations from Eastern Europe would be able to do business without paying appropriate wages.

The EU Commission, the parliament and the council of ministers turned the proposals upside down to avoid social dumping.

Foreign workers must work under foreign conditions

This means that the infamous Polish plumber will now be forced to work for German wages and under German rules in Germany.

"A wide range of services will be exempt from the new law. Health care, child care, public services, electronic media, banks and gambling are among them," said Arlene McCarthy, head of the parliamentary committee for the internal market.

Nevertheless the EU-Commissioner for the internal market, Charlie McCreevy, hopes that the new legislation will help to create jobs in cross border services.

"Member states will have to remove many bureaucratic hurdles and cut a lot of unnecessary red tape to allow easier access to their national markets," McCreevy said.

"They will have three years to do so. The EU Directive on services has to be transferred into national law by the then 27 member states by the end of 2009," he added.

The European business association UNICE said in a statement the new services law did not fulfill the expectations of the business community.

The organization added it would block the creation of new jobs and would instead create new legal uncertainty for businesses and consumers.