Ireland's EU Commissioner Charlie McCreevy has given a robust defence of economic liberalisation, in particular the Services Directive, and issued a strong challenge to advocates of protectionism to defend their views.

Speaking at the Dublin Economic Workshop economic policy conference in Kenmare yesterday, Mr McCreevy said that Europe's capacity to sustain its way of life would depend on a willingness to take correct decisions now.

"The world is changing and Europe must change with it. We have insufficiently concentrated on developing the competitiveness we need in the future," he said.

Mr McCreevy recently faced controversy in Sweden relating to the effect of the Services Directive on Sweden's system of collective bargaining and is presently driving the so-called Services Directive - which aims to liberalise trade in services - through a consultation process. The directive has been strongly criticised for threatening employment and social conditions in Europe. The criticism has come mainly from socialist, green and far-left MEPS in the European Parliament, where it has been the subject of debate and amendment.

While saying that compromise on reform was needed, Mr McCreevy said that differences in the performance of Europe and the US showed that reform was needed. "Rigidity in some of Europe's biggest labour markets is an obstacle," said Mr McCreevy.

Mr McCreevy said that using protectionism as a means of protecting European jobs would have an effect opposite to that intended. "It is not surprising that calls for protectionism comes from countries where unemployment is highest and that outsourcing is occurring most in countries where unemployment is lowest. . . What makes protectionism so dangerous is that so many of the arguments advanced for it are so superficially attractive," said Mr McCreevy.

The liberalisation of markets would lower costs and prices and boost employment, he argued. "Are there fewer jobs in the airline industry since Europe liberalised this market? The end result of liberalisation has been more jobs and lower prices."

Defending the Service Directive, which is being finalised, he said that the single market would not be effective in competing with the US if it retained 25 different sets of legislative regimes. But he acknowledged that the process of finalising the directives provisions was likely to result in a "broad compromise".

Mr McCreevy said there was a danger of the public losing confidence in an EU that failed to change. "Erecting protectionist barriers - as some would have us do - is no answer. Even King Canute eventually had to face facts."