Pressure mounted today for the European Union to withdraw or fundamentally rewrite a proposal to liberalise the market in services amid fears that protests against job losses could derail the EU constitution.
EU leaders gathering for a summit were expected to endorse a weekend deal by finance ministers to relax budget deficit rules despite European Central Bank warnings that any deterioration in public finances could hurt public confidence in the economy.
But the battle over how far to open cross-border competition for businesses ranging from computer consultants to plumbers took centre-stage as they entered their two-day meeting.
The European Commission believes that liberalising services, which account for 70 per cent of the EU economy, holds the key to rekindling Europe's anaemic economic growth. But French President Jacques Chirac planned to demand a major rewrite of the EU executive's draft legislation.
Hostility to the so-called "Bolkestein directive" has helped propel the "no" camp into the lead two months before a French referendum that could seal the fate of the new constitution.
"The Bolkestein proposition will not fly, so we have to start again," Swedish Prime Minister Goran Persson said. Trade unions and the left, echoed by many centre-right governing politicians, have warned against "social dumping" - undermining wages, consumer rights and environmental standards by an influx of service-providers from low-cost countries.
European Commission President Jose Manuel Barroso refused to withdraw the proposal and said allegations that it would undermine existing workers' rights were unfounded.
However, he pledged amendments to take account of key French concerns, notably by exempting public services, including health, and guarding against "social dumping".