Social Europe’s last stand?

The European Commission is about to decide whether to introduce specific legislation safeguarding universal standards in services of general interest. To some, it is a last battle to preserve social Europe against the forces of globalisation and cross-border competition. The Party of European Socialists will be leading the attempt to place public services at the heart of EU society. The increasingly market-oriented Commission, however, is unlikely to pay any heed.

The European Parliament will be adopting its opinion on the Commission’s 2004 White Paper on services of general interest at the end of September. Before that, on 19 September, at a conference in Brussels, the Socialists will be launching their campaign for a cross-sector draft framework directive on services of general interest in an attempt to spur or shame the Commission into action.

Brian Synnott, campaign director for the European Federation of Public Service Unions, accuses the European Commission of taking a "stall and crawl" approach. "The Commission has been hiding behind the idea that it’s too difficult to make a proposal. The Socialist text shows you can have an instrument, it’s not that difficult," he said.

The call by Socialist MEPs for the Commission to present cross-sectoral legislation to define and, by extension, protect services of general interest reflects the advancing tide of market opening pursued by the EU since its inception in the 1950s. Article 86 of the EC Treaty (Article 90 of the original Treaty of Rome) specified that public undertakings were covered by competition rules and in particular the four freedoms. However, it made the additional clarification that these rules applied as long as the application "does not obstruct the performance, in law or in fact, of particular tasks assigned to them". "General interest" was defined as public health and safety while later treaty revisions added economic and social cohesion, consumer protection and Trans-European networks.

However, as the completion of the single market focused increasingly on the provision of services which had traditionally been the responsibility of state-owned or other public monopolies, such as energy, telecommunications and postal services, the liberalisation drive came to impinge more and more on public undertakings. The view of the Commission, reflected in a series of legislative proposals aimed at liberalising key sectors, has been that even where undertakings retain exclusive ownership there must be access for third parties to essential networks to enable them to compete and to honour the treaty obligations on the free movement of capital and services. In particular, the priority was to ensure that there was no discrimination in terms of access between national service providers and those from other EU states.

Following the successive waves of liberalisation of the energy and telecommunications sectors, what has remained is often a social or "universal service" obligation such as the requirement to provide access to a telephone line. The Commission has allowed some countries, such as Sweden and Finland, to keep their state alcohol monopolies with some changes to the allocation of exclusive rights.

The Commission is reluctant to propose cross-sectoral legislation defining services of general interest because, as it states, each member state’s traditions and treatment of certain sensitive sectors varies. The Swedish school system is privatised to an extent unthinkable in other member states, for example. Setting in stone definitions which would prevent liberalisation would go against the well-established push for completing the single market. In any case, such legislation is unlikely to be approved by a majority of member states as an increasing number of countries back liberalisation as a way of boosting competitiveness and increasing opportunities for businesses and workers alike.

The Commission has been active in related areas. In July 2005, it produced the so-called Monti package, a state aid action plan ushering in a set of rules governing compensation for public service providers. This was based on the 2003 Altmark ruling delivered by the European Court of Justice, which defined instances where state aid might be considered legal (see page 19). The plan said that compensation for the provision of services of general interest would not be considered as state aid in cases where there was a clear public service mission and it defined standards and limits to be observed by local authorities.

In public procurement, the Commission is to present further clarification of rules covering public-private partnerships this year after a public consultation launched in 2004.

If the EU constitution had been passed, the debate on public services might have been given fresh impetus. The constitution accorded the Commission the power to define conditions governing services of general interest within an overarching framework.

Advocates of an all-encompassing directive argue that without such a clear legal framework governing the extent to which each relevant sector of the economy is affected by competition and internal market legislation, the financing and management of essential services will depend on the vagaries of case law and judicial interpretation. But, given that by now specific legislative provisions exist for each sector concerned, it seems highly improbable that the Commission will act on the Socialist initiative. Most likely, the Commission will follow up Parliament’s opinion on the 2004 White Paper with yet another communication.

The European Commission is about to decide whether to introduce specific legislation safeguarding universal standards in services of general interest. To some, it is a last battle to preserve social Europe against the forces of globalisation and cross-border competition. The Party of European Socialists will be leading the attempt to place public services at the heart of EU society. The increasingly market-oriented Commission, however, is unlikely to pay any heed.