Slotting final pieces into the liberalisation jigsaw

Date: 17/12/1998

By Chris Johnstone

INDUSTRIAL liberalisation progressed in 1998 without dramatic deals by ministers, but with a lot of backroom preparations for boosting competition in the energy, post and rail markets.

Following the deal struck in late 1997 over gas liberalisation and in light of the February 1999 target for the start of EU-wide electricity competition, member states and European Commission officials have spent the last 12 months filling in the details of how this should be achieved.

In particular, national governments have been submitting their detailed plans, although somewhat late in the year in the case of France and Italy, for launching electricityliberalisation two months from now.

They have opted for one of two market-opening alternatives: negotiated third party access where buyers are able to deal direct with power producers and its more restrictive alternative, the single buyer system where one electricity company is positioned as a middleman between buyers and sellers. Both options have won backers.

Although Greece, Ireland and Belgium were offered extra time to get ready for liberalisation, Belgium has chosen to go with the flow and will not exercise its one year derogation. Its decision will contribute to a market-opening covering around 60% of the EU's electricity market in February, far exceeding the directive's initial demands for about one-quarter of the market to be opened up to competition at the start.

Although the Commission will not deliver its recipe for future postal liberalisation by the end of 1998, its preparatory work and recent comments from Industry Commissioner Martin Bangemann point clearly to a determination that the next steps after 2003 - the horizon for already announced market-opening proposals - should be short and sharp. Anything else, Bangemann has warned, would only lead to a slow erosion of post offices' market share by e-mail, fax, and express delivery companies.

Parcel firms are already warning that some governments, such as Italy, will be slow to deliver the unambitious package of postal liberalisation measures masterminded by France and Germany at the end of 1996 which are due to take effect at the start of next year.

Away from the legislators and legislation, postal companies gave their own on-the-ground impetus to change with Germany's Deutsche Post taking a major stake in express carrier DHL and the Dutch Post Office sealing a deal with TNT.

If every action, to paraphrase Einstein, had a corresponding reaction, then one would expect Neil Kinnock's proposals for rail liberalisation to be truly earth-shaking, given that they sparked a one-day train strike in Belgium, Luxembourg, France, Greece, Spain and Portugal.

In fact, all Kinnock's proposal amounts to is a demand that 5% of the EU's freightmarket be opened up to competition immediately, with a 25% liberalised within ten years. The Commissioner argues that since nothing else has failed to stem rail's loss of market share this is worth a try.

His previous attempt to kick-start rail competition by earmarking special cross-border 'freeways' for freight has had mixed success, with relatively few routes being launched and would-be participants complaining that the right times on the right track are still difficult to obtain.

Telecoms liberalisation, which began at the start of the year, has been given a clean bill of health by the Commission in its latest progress report.

However, the new German government is showing signs of concern that the process of breaking down former monopolies might have gone too far in weakening Deutsche Telekom.

Feature forms part of the European Voice 'Review of the Year'.