"A real advance, a step no one would have believed possible just 12 months ago." Charlie McCreevy's reaction to the European Parliament's decisive vote in favour of the substantially amended services directive yesterday judges the decision very well. Since services account for some 60 per cent of the EU's wealth and jobs but only a fifth of its internal trade, the effects of creating a regulated single market in them will stimulate growth and employment in years to come. The basic parameters on how that will be done have now been agreed in a welcome compromise which underlines the parliament's central role in the democratic life of the European Union.
As the commissioner responsible for its passage, Mr McCreevy has adopted a pragmatic attitude to a piece of legislation he inherited and sympathises with but has regarded as seriously flawed. As amended, it will now be processed in detailed negotiations between the commission, the council of ministers and the parliament. The EU's current Austrian presidency has vowed to see it well progressed by the summer, so it should also become a prominent item on the agenda of national parliaments too in the months to come. That is where most of the EU's real democratic deficit is to be found.
Another Irish participant in the debate, Proinsias De Rossa MEP, neatly described the major change in the draft directive as substituting the "country of destination" principle for the original "country of origin" one in determining how it will be applied. For the most part this is correct although it does not reproduce the protectionism the directive is designed to clear away. The distance travelled has left many trade unions much happier and many employer organisations dissatisfied.
Service companies setting up in other states will have to adhere to public service and labour legislation and collective agreements applying there rather than in their home states. The elaborate negotiations between the centre-right European People's Party and the European Socialists concentrated on how to apply this principle in detail to particular sectors. Thus "services of general economic interest" like water, sewerage and waste facilities will be included, but subject to national laws. Such compromises have offended the Greens and French Socialists, who voted against, as did a number of liberals and conservatives for varying reasons. But, all told, group discipline in the parliament held up surprisingly well.
Potentially the services directive is as important a change as the single market and single currency have been in transforming the European economy and framing its relations with the rest of the world. Politically the directive has already had an enormous impact. Fears that the "country of origin" principle would undermine employment standards played a major role in the French and Dutch referendum campaigns against the European constitution last summer. Similar fears were at play in the Irish Ferries dispute. This vote shows that politics at the level of the European Parliament makes a difference.