30 March 2005

The Web

MEP to present changes in services directive ‘country of origin’ rule
By Matthew Vella

The Maltese economy is feared at risk of welcoming more workers from the EU and beyond the community’s borders if a further liberalisation of services is allowed through the implementation of the controversial services directive.
Malta has joined the chorus of disapproval led by France and Germany, arguing it could have a negative effect on the Maltese economy. Prime Minister and Finance Minister Lawrence Gonzi said Malta was concerned about some aspects of the directive which could have a negative impact on the Maltese services sector.
The European Commission is arguing that the services directive would resolve the problems of excessive red tape for service companies wanting to operate across borders, boosting cross-border competition and increasing choice, improving quality and reducing prices for both consumers and businesses. Consumer associations have also expressed their support for the directive.
But trade unions and European socialists have expressed fears that service providers in EU countries with lower levels of workplace legislation could undercut and undermine companies operating in countries with high social protection.
Malta’s gross domestic product, made up mainly of earnings from employment and entrepreneurial income, is believed could suffer as foreigners pour in, stay on for short stays, spend little and then expatriate their income.
The directive would also allow Member State recruitment agencies to employ third country nationals from North Africa, Russia and Asia to work in the EU, undercutting labour rates.
Critics also argue that the directive skirts safeguards agreed between the Maltese government and the EU on the free movement of workers by forcing Malta to further open up the Maltese labour market.
GRTU director general Vince Farrugia has already said that once the service sector is fully liberalised it will become easier for other Member States’ services providers to take up contract work in Malta than for Maltese contractors to take up work in other EU member states and that Malta’s enterprises in the services sector “are simply not geared for this”.
One of the most controversial issues is the ‘country of origin’ principle, which means that service providers are subject to the laws of their country of origin rather than of the country where the service is provided.
The European Trade Union Confederation (ETUC) called the Commission’s draft “seriously flawed”. In ETUC’s view, services of general interest, health services and social services should be excluded from the directive. Moreover, unions fear that the ‘country of origin principle’ provides “an open invitation for abuse and manipulation” and that it “touches on labour law issues in a far reaching and totally unacceptable way.”
Unions like Union Haddiema Maqghudin say the directive is “anti-social”.
German MEP Evelyne Gebhardt, the rapporteur who will put amendments to the directive before the EP internal market committee on 19 April 2005, expressed her intention to shift the focus of the directive to concern commercial services only and not those of “general interest”. In her view the ‘country of origin’ principle also needs changing.
Gebhardt will propose a soft type of harmonisation via the tried and tested internal market mechanism of mutual recognition. Her view is that it should apply in most areas. If so, it would only mean changing five or six other directives.
The proposed directive has also been blamed for negatively influencing potential “yes” voters in France, as they have been linking it to the European Constitution.


The Malta Financial & Business Times is published weekly on Wednesdays.
Website is updated weekly on Thursdays at 15.00CET
Copyright © Newsworks Ltd., Malta
Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
Tel: (356) 2138 2741 | Fax: (356) 2138 5075 | E-mail