IGC battle looms over free markets

Date: 29/02/1996

By Tim Jones and Fiona McHugh

FEARS are growing that a French campaign to ensure the European Union's revised treaty includes cast-iron commitments to public service obligations marks the beginning of a backlash against years of market liberalisation.

With four weeks to go until the start of the Intergovernmental Conference in Turin, French politicians want to give treaty protection to essential service suppliers - such as Electricité de France, La Poste and the SNCF railway operator - against rampant market forces.

Industry Minister Franck Borotra has gone as far as suggesting that “in certain sectors, the opening of the market to competition has been a grave mistake”.

While consumer groups may give the idea a tentative welcome, rival companies and more market-enthusiastic member states are suspicious, and warn that the French are already using the idea of public service to delay an agreement on prising open the EU electricity market.

“Our view is that public services can be accommodated in a liberalised market,” said a representative of the UK's electricity companies. “You don't need to have a monopoly market to provide a universal service.”

The issue is also dividing the Commission. Research Commissioner Edith Cresson yesterday (28 February) managed to win her colleagues' support for a proposal to include a commitment to “universal access to services with a general interest” in the Commission's submission to the IGC, despite opposition from Competition Commissioner Karel Van Miert. He argued instead for a non-binding public services charter.

In the past, the Commission defended its position by pointing out that its efforts to open up utilities markets always specified the need to maintain a universal service available to all citizens. But this is obviously no longer considered to be sufficiently water-tight.

The French government proposal is expected to request that extra flesh be put on Article 90(2) of the Treaty of Rome, which specifies that enterprises with public service obligations should not be obstructed in their statutory tasks by the EU's competition rules.

Behind the French plan lies a growing unease that the Commission has begun to abandon its neutrality, enshrined in Article 222, over whether companies should be in the public or the private sector.

“The Commission often gives the impression it is on a privatisation crusade,” complained a French official. Instead of constantly pointing to the beneficial effects of liberalisation, say the sceptics, the Commission should also consider the downside, such as telephone operators raising the price of domestic calls while cutting international tariffs.

At last December's Madrid summit, President Jacques Chirac managed to win a commitment to public services. The new proposal will build on this by calling on enterprises which perform “tasks of general economic interest” to provide a universal service to all their customers.

This means customers pay the same price wherever they are, so maintaining the system of uniform tariffs that effectively transfers 300 million ecu a year for electricity, and more than a billion ecu each for post and rail, from French cities to the countryside.

But the backlash is itself in danger of producing a counter-backlash. Last week, Irish Liberal MEP Pat Cox resigned as parliamentary rapporteur on EMU and the IGC partly in response to the push towards a public service charter, calling it “creeping protectionism”.

An official at British Telecom was even tougher. “Our main concern is that this public service clause could be used as a pretext by those in favour of maintaining monopolies to block the general move towards liberalisation.”