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Free market hits nerve

EUROPEAN Union leaders agreed that a directive liberalizing the European services market would be reshaped but not withdrawn. The decision is a setback for Germany and France, both of which wanted the directive dropped.

EUROPEAN Union leaders agreed that a directive liberalizing the European services market would be reshaped but not withdrawn. The decision is a setback for Germany and France, both of which wanted the directive dropped.

Established EU members fear the entry of low-cost foreign competitors on their lucrative national services market. Slovakia, which spoke on behalf of all new-EU members, warned that slowing or preventing liberalization would amount to "protectionism".

"I think that the fears of certain EU-member countries are unjustified. Their fears did not materialize when they agreed to liberalize the labour market. We do not expect their fears regarding the liberalization of services to materialize either," Peter Papanek told The Slovak Spectator. Papanek is the advisor to Slovakia's Finance Minister, Ivan Mikloš.

Mikloš himself told the daily SME that he regrets the attacks made against the directive. He says opening up the EU services market would, in fact, increase competition and bring cheaper services to most people in the European Union.

The European Commission's "Bolkestein Directive", named after the former European Commissioner for Internal Markets, Frits Bolkestein, is intended to create an EU-wide internal market in services.

EC Commissioner Ján Figeľ said that the Bolkestein Directive was politically sensitive in many countries, making the debate more emotional than pragmatic, according to the news wire SITA.

The EC agreed that the directive would be modified on the principle of necessity. In other words, the EC would have to liberalize the services market but would try to preserve the existing social model.

Slovak Prime Minister Mikuláš Dzurinda is happy that established EU members recognize the need to liberalize the market.

"The result of the debate is that the proposed directive remains a basis for going forward; it will not be withdrawn," the Prime Minister told the news wire TASR.

Representatives of France and Germany worried that if approved in its original form, the directive would encourage new member countries to flood their markets with cheap services, potentially destabilizing their national markets.

Under the Bolkestein Directive, almost all services companies could compete on the EU market, from banks to retail stores to theatres to hospitals.

The service sector makes up 70 percent of the European economy. The directive aims to open up European markets to competition so that service providers can offer their services across national borders.

Established EU members are not the only ones hesitant to liberalize the market. Trade unions and socialist parties are expressing increasing nervousness over the issue.

Slovak businesses are critical of the established EU-member countries that oppose the directive.

"We take a negative view of the efforts of many old members to weaken the liberalization trend and do not appreciate the defensive attitude of some members of the European Commission that are suggesting that the directive needs modification," President of the Association of Businessmen of Slovakia Ján Oravec told the business daily Hospodárske Noviny March 9.

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