Flying the flag too high for liberalism?

José Manuel Barroso’s European Commission is often painted as excessively liberal, particularly by its opponents on the left, but also by French President Nicolas Sarkozy. He accuses the EU of elevating competition to a "religion" and it is clear that he sees the Commission and the European Central Bank in Frankfurt as the high priests.

Free marketeers occupy the key economic posts in Barroso’s team, whether it is trade, the single market or competition. But a number of recent events have shown that depicting the EU as an unstoppable force for the triumph of the market and the irresistible forward march of liberalisation is exaggerated, if not plain wrong.

Last week Germany’s governing coalition ran into a storm of criticism, both internally and outside the country, for announcing a minimum wage for the postal sector. The move was the result of long pressure from the Social Democratic Party which insisted on a quid pro quo for opening of the domestic postal market for small items from next January. But the decision was attacked by the FDP, the free-market liberal party, as well as the head of the German employers’ federation, the BDA, for undermining the effects of market liberalisation.

PIN, a service company set up specifically to compete with Deutsche Post, could be wound up this week as the minimum wage will reduce its chance of competing. The Netherlands will delay the opening of its own postal market in response.

In Brussels, Competition Commissioner Neelie Kroes said that the German move would be at the expense of consumers. But neither Kroes nor Internal Market Commissioner Charlie McCreevy is planning to take any specific action in response to the minimum wage move. A spokesman said that minimum wages were outside the Commission’s competence.

On Tuesday the European Court of Justice (ECJ) passed judgement in a case brought by a Finnish ferry company, Viking Line, against the International Transport Workers Federation (ITF) and the Finnish Seamen’s Union (FSU). Viking was challenging a campaign by the two organisations against its attempt to register ferries working the Helsinki-Tallinn route under an Estonian flag. This would have allowed it to pay lower wages to crew members. Viking brought a case in the UK court of appeal, saying that the ITF and FSU’s actions were a restriction on the freedom of establishment. The UK court referred the case to the ECJ.

The court’s judges found that the trade unions’ action did represent a restriction of the freedom of establishment. But it also found that collective action was justified in the pursuit of certain objectives, such as the protection of workers. It referred the case back to the national court to decide whether the unions’ action was proportionate and, in particular, whether the organisations could have tried other measures to achieve their aims.

Similar issues will be at stake in a judgment expected from the ECJ next Tuesday (18 December). The Latvian company Laval un Partneri is challenging actions by LO, a Swedish trade union, to prevent Latvian workers building a school in Vaxholm, Sweden. Laval says the action infringed EU treaty rules on the freedom to provide services.

The four freedoms for capital, persons, goods and services are fundamental principles in the EU treaty and their implementation is ensured through secondary legislation and an extensive body of case law. But social and labour market legislation is still the preserve of national law. Even though provisions like the right to collective action including collective bargaining do not have the same degree of explicit legal guarantee at EU level as the four freedoms, these rights are strongly protected at national level. As the ECJ recognised in its judgement on the Viking case, protection of workers is a legitimate objective even where it clearly restricts the freedom of establishment.

Next week’s judgement on the Laval case will provide some greater legal clarity but the fact remains that the interaction of EU single market law and national social protection will always produce unresolved tensions. Kroes and McCreevy may regret the lost opportunity for bringing greater competition to the postal market following Germany’s decision to introduce a minimum wage in the sector. But the two parties in the German coalition, which are facing elections in the next year or so, are acting to shore up their share of votes. Citizens vote in national elections based on their most immediate concerns, which are mainly about job and income security - and not according to the wishes of the Brussels beltway.

José Manuel Barroso’s European Commission is often painted as excessively liberal, particularly by its opponents on the left, but also by French President Nicolas Sarkozy. He accuses the EU of elevating competition to a "religion" and it is clear that he sees the Commission and the European Central Bank in Frankfurt as the high priests.