Franco-German axis wins protection for welfare services
Germany and France joined their EU partners today in a drive to inject new life into Europe’s sluggish economy, after winning guarantees on the protection of the welfare state and the right to spend their way out of a slump.
Over dinner in Brussels last night, German Chancellor Gerhard Schroeder and French President Jacques Chirac won their fight demanding a review of an EU bill that would open up the 25-nation market for cross-border businesses in the service sector.
The bill aimed to create 600,000 jobs, but France and Germany fear it would erode Europe’s social protection standards by letting companies from countries with low taxes and social protection undercut rivals in high-cost nations.
Arriving for today’s talks, Schroeder said amendments to the proposed law must open markets while taking “social sensitivities” into account.
“There is a good chance that will happen,” Schroeder said. ”We will find a suitable solution.”
The leaders debated ways to boost the economy after the EU admitted last month its listless economic performance had derailed plans to become the world’s most dynamic economy by 2010.
“Europe needs new confidence in its economy. We need reform to put out the right signals to our citizens … to meet the expectations of our citizens,” said Jose Manuel Barroso, the European Commission president.
Efforts will centre on increasing investment in research and development and cutting red tape.
A draft of the summit statement calls for “urgent action,” and adds that it is “essential to … refocus priorities on growth and employment” to create “an attractive area in which to invest and work.”
Schroeder and Chirac got the 23 other leaders to back a major watering down of rules underpinning the stability of the euro to enable governments to spend their way out of economic slumps.
Chirac lauded the move to change the euro’s so-called Stability and Growth Pact. The pact still limits annual budget deficits to a maximum of 3% of gross domestic product but gives euro-zone nations more freedom to exceed it when they want to trigger growth.
Chirac called it a “real trump at the service of growth and the ambitions of the EU”.
Schroeder and Chirac also sought an end to Europe’s arms embargo against China despite opposition from the United States and several Asian nations.
Several EU nations sought to end the ban by later this year, but China’s move to allow force if Taiwan declares independence put member states like Britain back on guard.
Perhaps as important were the changes promised to the services directive; Chirac is facing an increasingly recalcitrant electorate which votes on the EU constitution in a referendum on May 29.
Increasingly both issues were linked as polls showed for the first time the constitution could be voted down.
Such a rejection would be a huge political setback for the 25-nation bloc.
“We have to fully respect the European social model,” said Jose Manuel Barroso, who will be in charge of redrafting the proposed directive. “The majority of the Europeans will be proud of the directive,” he said.
