EU Approves Service Sector Reform

The proposed directive, which the European Commission originally put on the table in 2004, aims to create a European service market free of most administrative and political obstacles currently holding back service providers from setting up shop in other member states. Supporters also hope it will generate much-needed jobs in the 25-nation bloc.

"We can now move on to focus on the delivery of real economic benefits for consumers and companies," said eurodeputy Malcom Harbour, who worked on the text on behalf of the conservative European People's Party (EPP), the biggest political group in the parliament.

The services sector is responsible for half the economic activity in the EU and 60 percent of its jobs. The European Commission, the EU's executive arm, said reforms are essential for spurring employment and growth in Europe's long-flagging economy.

The directive, which still needs to be approved by the European Commission and member states, would cover any service not explicitly excluded or covered by other EU-wide legislation. Catering, advertising, architects, the construction industry, accountants, hairdressing and the computer industry would all be covered.

The EPP and the Socialists, the parliament's two largest parties, agreed health care and social services such as social housing and childcare would be excluded as well as services like education that are provided directly by the state.

In order to reach a compromise before Thursday's vote, the parties watered down the proposal to allow member states to bar service providers for a number of reasons, provided the intervention is non-discriminatory.

Companies to follow host nation's laws

"What we've got now is a directive which very clearly will promote opening markets, reduce red tape and facilitate cooperation," German Social Democrat Evelyne Gebhardt told journalists. "At the same time, I think it takes account of the rights of workers and consumers."

The deal, which passed by a 394-215 margin, will allow companies to provide their services across the EU, but require them to adhere to the labor, health, safety and environmental standards of the host country. Previous versions of the bill, which allowed companies to follow the standards of their home country, met with stiff resistance.

The bill's opponents, including Germany, France and Austria, fear an influx of cheap labor -- epitomized by "Polish plumbers" willing to work longer for less pay -- would undercut local competitors.

Changes needed to push competition

Free market supporters, such as Britain and the EU's new east European member states, have said the directive is necessary to increase competition across the union.

The agreed upon proposal, however, is too weak for some proponents. EPP vice-president and Hungarian parliamentarian József Szájer wrote in Wednesday's Financial Times that he thought a majority for a broader proposal could still be found and called on lawmakers to vote against the compromise.

"If the number and extent of excuses for states to control service providers from other member states grows beyond the present situation, the original rationale of the draft directive is lost," he wrote. "If the text ends up according to last week's compromise, it is better to vote against it, than support a directive that creates new obstacles and freezes Europe's services market for 30 more years."

The EU parliament was eager to produce a broad majority so that member states, who are themselves deeply divided on the issue, will not be tempted to veer from its text when it is the governments' turn to look at the package.