The Services Directive – ‘a race to the bottom’
How EU rules attack public services, jobs, pay, pensions and trade union collective bargaining rights
I am pleased to introduce this important pamphlet on the proposed Services Directive and the threat it poses to working people and their families.
This directive and the now discredited EU Constitution it formed part of is quite simply a privateers’ charter designed to allow big business more freedom to exploit workers.
Despite the ‘no’ votes in France and the Netherlands in 2005, EU elites are carrying on regardless, exposing once more the contempt that EU institutions have for democracy.
There was a time when even saying these things was met with disbelief and an almost mystical faith in ‘Brussels’.
However, EU commissioner Jacques Delors’ famous 1988 speech to TUC Congress, promising eurojam tomorrow, now seems a long time ago.
Behind all the flam of the so-called ‘European Social Model’, the full-bloodied neo-liberal, dictatorial and military agenda of the EU is now clear for all to see.
Today, TUC policy decided by Congress in 2005 is against the EU Constitution, the Services Directive and other directives which enforce the privatisation of essential public services.
From the rail directives that privatised British Rail to the EU diktats that broke up lifeline ferry services in Scotland, transport workers have borne the brunt of these attacks.
Now that the EU has been exposed for what it really is, an unaccountable bureaucracy for extending the power of big business, it is time for workers everywhere to combine to resist what they have planned for us.
RMT general secretary
The Services Directive and the internal market
“The Commission which produced the ‘country of origin’ principle, which was removed from the final text of the directive, will clearly return to it as a matter of course”
EU internal market commissioner Charles McCreevy
On May 29, 2006, exactly a year after the French people rejected the EU Constitution, EU institutions finally agreed a text for a controversial Services Directive.
The directive must be translated into over 20 languages and there will be an extended period of three years for member states to comply despite the fact that no electorate in Europe has voted for it.
The Services Directive is a mechanism for introducing ‘free-market’ competition to all services within the EU, including health and education, as originally envisaged within the rules of the now discredited EU Constitution.
A major plank of the directive involves abolishing controls, democratically decided by national parliaments, which impede the free movement of services.
In order to establish this new order, the directive gives the EU’s own European Court of Justice the power to deem which national laws are ‘illegal’ if foreign and offshore companies do not have total access to service provision markets.
The original text of the directive, first presented by the EU internal market commissioner Frits Bolkstein in 2001, contained the so-called ‘country of origin’ principle which exempted foreign companies from the laws of host countries they operated in.
Under these arrangements, all minimum wage levels and health and safety standards could be ignored in the pursuit of profit. As a result, companies registered in EU member states with minimal labour standards, could undercut pay and conditions secured by workers in other member states.
Not surprisingly, this provoked huge trade union protests across Europe and raised concerns of widespread ‘social dumping’ that would spark a ‘race to the bottom’ regarding wages and conditions.
These concerns proved to be a big factor in the French rejection of the EU Constitution followed by widespread calls for the ditching of the offending directive. However, within the undemocratic structures of the EU, only the unelected European Commission can initiate and withdraw legislation.
Following these protests, over 400 amendments were presented to the European Parliament, including demands to remove all mention of the ‘country of origin’ principle and for health care and social services to be removed from the directive. These amendments, which left 85 per cent of the original directive intact, were agreed in February 2006.
However, incoming EU internal market commissioner Charles McCreevy immediately declared that the amendments counted for very little and the original intent of the directive remained in place.
He told the Council of Ministers: “article 16 fully recognizes the right to provide services on a cross-border basis and sets out clearly the kind of requirements on incoming service providers that have to be abolished in line with ECJ case law”.
McCreevy indicated that the European Commission is also working on legislation for sectors exempted from the directive, including healthcare – meaning the National Health Service, as well as returning to the country of origin principle.
“The Commission which produced the ‘country of origin’ principle, which was removed from the final text of the directive, will clearly return to it as a matter of course,” he said.
Moreover, in the ‘reformed’ directive there is no ‘country of destination’ principle or any clear protection for national standards.
And companies no longer have to register in host countries and can relocate to the most favourable locations to circumvent national standards. Any final decisions on the interpretation of EU law and the directive will be exercised by the EU court based in Luxembourg.
The Services Directive is part of the drive to impose a Single European Market (SEM) within the EU in order to complete the “free movement of capital, services, people”(meaning labour) as laid down in the EU treaties.
Thus cheap migrant labour can be cynically used to batter down hard-won national standards and undermine collective bargaining rights established by trade unions over many years.
As such, the ‘reformed’ directive still creates an anti-social Europe by forcing open public services to the privateers.
The Vaxholm case, dealt with later in this pamphlet in more detail, vividly shows how the European Court of Justice is seeking to undermine trade union collective bargaining rights. This particular case concerns a Latvian firm operating in Sweden using low-cost Latvian labour in contravention of Swedish law. Swedish workers took industrial action in protest and the case has gone before the EU court.
The European Commission openly backs the Latvian firm’s union-busting case and claims that Swedish labour laws contravene article 49 of the EU treaties on the free movement of people.
These and other EU rules are designed to allow big companies the freedom to move assets and services anywhere in Europe, where labour costs are lowest, and to force labour to meekly follow in the search of work.
The recent Irish Ferries strike – where cheap foreign labour displaced Irish seafarers – and the Gate Gourmet strike – where lower paid Polish workers displaced British Asian workers – and the Swedish Vaxholm case are all examples of how big companies are using these new-found freedoms to increase the rate of exploitation to enrich themselves.
The Services Directive and healthcare
"We will come with a separate proposal on health services preferably by the end of the year", Margaritis Schinas, (Director of the Office of the EU Commissioner of Public Health)
Following the exclusion of healthcare from the Services Directive, the European Commission immediately announced plans for a new separate directive by the end of 2006 to open up health services to free market competition.
Not surprisingly, European Court of Justice rulings have assisted this process by using internal market arguments first mooted in the Services Directive.
In a recent landmark case, the ECJ ruled that British national Yvonne Watts was entitled to claim money back from the British health service for treatment carried out in France.
TheFinancial Times (17/5/06) reported that the court’s decision was a further step towards the establishment of a single market for healthcare in the EU, despite the member countries’ very different health systems.
The recent Watts judgment forces countries to pay for treatment in other states. This ‘patient mobility’ represents the thin end of a very big wedge for introducing full-blown market mechanisms into healthcare provision.
EU health spokesman Margaritis Schinas said that the ECJ ruling on patient mobility"clearly states that there is scope for community action to achieve public health objectives".
He went on to claim that patient mobility was covered by under article 95 of EU treaties covering internal market rules –“that's what the court says" he helpfully pointed out.
This has huge implications for the National Health Service, which is peculiar in Europe as it is free at the point of use and funded by the taxpayer. Most healthcare systems within the EU are insurance-based schemes which are more expensive and have not achieved the same level of free services as in Britain.
The European Central Bank has openly speculated that the free range of services provided by the NHS may have to be curtailed because of their allegedly “inflationary” potential.
An ECB report from May 2003 called on eurozone members to reform their health systems so that “public health and long-term care systems should focus on providing core services for healthcare prevention while leaving individuals to provide for non-essential expenditure”.
The report argued that public health and long-term care arrangements are best reformed by “limiting the public sector's exposure” and “enhancing private funding”. It goes on to suggest that the best means to achieve this is through an enhanced role for “market forces”.
These demands to open up healthcare provision to the private sector have manifested themselves in new Labour’s obsession with introducing hugely expensive Private Finance Initiatives into the health sector and turning hospitals into trusts. These moves have already led to a cash crisis in the NHS and the loss of over 7,000 jobs.
Following the Watts judgment, EU officials like Mr Schinas wasted no time in claiming that Brussels should claim more powers over healthcare.
He claimed that the judgment would allow the EU to dictate on health issues to avoid the ‘mess’ created by the EU’s own court ordering each individual member states about how to manage their healthcare arrangements.
"We view the latest judgment as very timely encouragement... saying that we are right because if we don't come up with a proposal, you can imagine the regulatory mess that would be created because we would have the court dictating health policy for national governments,”he said.
In true EU-style, Mr Schinas has refused to share details or the scope of the planned directive but he said that it was likely to cover"patient mobility... but probably other things as well".
He said the commission "has already triggered the process" by launching a debate among commissioners over the scope of the proposals.
It is illuminating that the EU still plans to create a healthcare market, as proposed in the original Services Directive, despite the fact that they were decisively rejected by citizens across Europe.
Moreover, such decisions emanating from the EU’s own court and the commission enforce internal market rules even to areas where member states are meant to have sole power such as healthcare.
The Kohll and Decker cases in 1998 were also landmark rulings in this area. Both cases found in favour of the claimants who were asking for reimbursement in member states other than their own for health care treatment. In both cases, the claimants’ claims were upheld under the free movement of goods and services law.
"The two 1998 Kohll and Decker rulings of the European Court of Justice…have served to underline the point that member states' health systems, and in particular the delivery of health care, do not lie outside the jurisdiction of community law" said a recent European Commission high level group report on health.
Ultimately, healthcare, like education, are highly emotive issues that are strongly linked to the confines of a modern nation state. Making it an EU competence at a stroke would have a massive impact on how people view their own governments and the undemocratic institutions of the EU.
The Services Directive and the Single European Act
“Margaret Thatcher was herself a driving force behind the Act and some of her ministers positively fizzed with enthusiasm about the Single Market which they believed achieved the Thatcherisation of Europe” Tory MP John Bercow
The genesis of the Services Directive can be found within the Single European Act (SEA), which was signed in 1986 by EU heads of state including Tory Prime Minister Margaret Thatcher.
The SEA entered into force on 1 July 1987 and was designed to establish a Single European Market (SEM), defined as an area demanding the free movement of goods, services, labour, and capital.
This Act sought nothing less than to set up a single market and establish a single economic, political and legal area within the EU. It was the first major revision of the 1957 Treaty of Rome and introduced qualified majority voting in the Council of Ministers for some policy areas, stripping member states of independent veto rights.
It replaced the rule of unanimity in four main areas: free movement of services, free circulation of capital, common policy on maritime and air transport and the introduction of a common customs duty.
However, since then, the areas covered by qualified majority voting have been massively extended by stealth, stripping countries of much of the powers associated with independent nation states.
The then president of the European Commission, Jacques Delors, also promoted economic and monetary union (EMU) and the single currency as a key element in this integration process.
To sweeten this neo-liberal pill, Delors proposed a largely symbolic Social Charter to ensure support for the entire project from trade union bureaucracies across Europe, particularly in Denmark and the UK.
Large parts of the labour movement fell for this particular trick following Delors’ infamous speech at the 1988 TUC conference which promoted the eurofederalist vision wrapped in progressive language.
He told TUC delegates that the EU was the alternative to mass unemployment and endless Tory attacks on the working class in Britain. In exchange for signing up to the entire eurofederalist project, Delors offered British trade unions a sympathetic ear in Brussels and share in the supposed economic benefits of the EU.
These alleged benefits obviously failed to materialise as over one million British manufacturing jobs have disappeared since 1997 alone. In Germany, the number of jobless has passed five million and French employment has ballooned to over ten per cent.
Journalist Larry Elliot captured the mood at the 1988 TUC succulently by pointing out that the Delors vision appealed to some of the less attractive traits of the left, such as:“the worship of power, the notion that there is always a big solution to the smallest of problems and the feeling that there is something unseemly about loving your own country”.
The Single European Act also began the long process of EU militarization, enshrining aspirations to create a single foreign policy and an EU-wide military-industrial complex to build and sell arms. This directly led to the hugely expensive project to build an EU fighter plane, the Eurofighter – a white elephant that has cost the British taxpayer over £20 billion at the last count.
This Act should be seen as fundamental part of the process of slowly and irreversibly centralising power to Brussels on a huge scale.
In 1991, EU heads of state signed the Maastricht Treaty, which formally proposed the introduction of the single currency. This was followed in 1996 by the Stability and Growth Pact, which established a strict convergence criteria for joining the euro.
This pact represented a Thatcherite economic strait jacket that has enforced huge cuts in public spending and austerity measures on all member states. Many have still not met these targets and even former EU commission president Romano Prodi – now Italian president – has described this damaging pact as ‘stupid’.
Since then, treaties like Amsterdam and Nice, and the failed attempt to impose an EU Constitution, all seek to centralise economic, political and legal powers within the EU without a democratic mandate to do so.
The big business origins of the Services Directive
“If we wait for our governments to do anything, we will be waiting for a long time. You can’t get all tied up with politics. Industry has to take the initiative”
ERT member Wisse Dekker of Philips
The Services Directive is widely known as the ‘Bolkestein’ directive after the Dutch EU internal market commissioner Frits Bolkestein who first proposed the idea back in 2000.
However, this recipe for mass privatisation on an unprecedented scale was drawn up nearly 20 years earlier by the EU employers federation (UNICE) and the European Round Table of Industrialists (ERT).
ERT membership is strictly by invitation only and made up of representatives from around 50 companies including DaimlerChrysler, Fiat, Nestle, Renault and Siemens as well as UK firms like BP, Rio Tinto and Rolls Royce. It has a clear remit to promote further EU integration to benefit European-based transnational corporations.
A simple Google search of ‘ERT’ reveals that this corporate group has been promoting the free movement of services and labour across the EU for over twenty years without any public accountability whatsoever.
The group has access to major players at all levels of the EU. The ERT's own website boasts:"At European level, the ERT has contacts with the European Council, the European Commission, the Council of Ministers and the European Parliament”.
In the early 1980s, Wisse Dekker of Philips and former EEC Industry Commissioner Etienne Davignon drew together a group of leading European corporate executives into the ERT with the objective of “relaunching Europe”.
“If we wait for our governments to do anything, we will be waiting for a long time. You can’t get all tied up with politics. Industry has to take the initiative. There is no other way,”Dekker argued.
Thiswas an internal Philips initiative led by the company’s Brussels representative, Coen Ramaer. He instructed four Philips consultants to:“imagine yourselves to be dictators of Europe and that you have decided that the job must be done in five years.
“Once they had picked up this idea, they found it fascinating. And they discovered that it could be done – given the political will, of course,”he explained in an interview.
Member states and much of the business sector had already rejected attempts by the European Commission to remove trade barriers within the EEC and create an internal EU market in 1984.
However, in January 1985 Wisse Dekker publishedEurope 1990: An Agenda for Action, which proposed the elimination of trade barriers, legal harmonisation and the abolition of fiscal frontiers within the EEC by 1990. These proposals formed part of an ERT document calledChanging Scales, which was sent to each EEC head of state.
This plan demanded the elimination of borders, the opening up of public procurement markets and full tax harmonisation to create a European single market.
Just days after Dekker presented his initiative, the newly appointed European Commission president Jacques Delors delivered a speech to the European Parliament closely matching Dekker's proposals.
A few months later, Industry Commissioner Lord Cockfield published his remarkably similar White Paper, which formed the basis of the 1986 Single European Act.
In the proposals, Lord Cockfield pushed through over 250 measures to remove barriers to trade by qualified majority voting. As Margaret Thatcher herself put it: “we wished to have many directives under majority voting because things which we wanted were being stopped by others using a single vote”.
The ERT had achieved its aim.
On January 11 2001, the European Commission formally launched plans for a Services Directive to force the wholesale deregulation of entire industries at a stroke. EU commissioner Bolkestein claimed it was time to end the sector by sector process of ‘liberalisation’ “when so many of the necessary changes are common to a wide range of services”.
“Some of the national restrictions are archaic, overly burdensome and break EU law. Those have simply got to go,” he said.
Bolkstein declared that “Article 49 of the Treaty of the European Union says that all restrictions on the freedom to provide cross-border services within the Union are prohibited.
“According to article 50 ‘services’ include in particular ‘activities of craftsmen and of the professions’.
“The European Commission has identified a large number of such obstacles. Their removal is crucial for the completion of the internal market,” he said.
Commission spokesperson Margot Froehlinger claimed that this must be implemented because there had been “several complaints” from corporations.
“We have come across all types of planning procedures which give discretionary powers to authorities which are clearly contrary to jurisprudence and are designed to protect local markets,” she said.
The Commission’s 2002 report preparing the way for the directive also cited at length alleged barriers to service provision across the EU.
However, even a report from the Europhile TUC, (Besides the Point,December 2005), criticized the vague and arbitrary nature of the commission’s claims and pointed out that many of the laws cited were irrelevant or not quantified.
“Much of the detail appears to have derived from complaints made by businesses in response to Commission surveys and consultations.
“Experience in the UK tells us that the volume of complaints about burdens on business has little connection with the actual importance of the issue when it comes to investment, growth and jobs,”it said.
Nevertheless, the final genesis of Bolkestein’s Services Directive had begun and companies would be given the opportunity to undermine the best national conditions and wages and drive them down to the lowest level.
For instance, a German company would be able to exercise its activities throughout the EU, including in Germany, with one branch operating from the Netherlands and another one from Belgium – depending on where the conditions generate most profit.
Accordingly, the German building union IG BAU has warned of a wave of service provider relocations to countries which impose the lowest legal requirements and export them back home.
Vaxholm and the threat to collective bargaining
"What, until now, have been regarded as fundamental rights of workers in all democratic states would be undermined in the name of free movement,"Swedish TUC (LO), vice-president Wanja Lundby-Wedin.
A case currently before the European Court of Justice highlights just how the Services Directive and the internal market exploits cheap foreign labour and batters down minimum standards won at a national level.
The case concerns a Latvian construction company, Laval, which was refurbishing a school in Vaxholm, outside Stockholm, using Latvian workers on low rates of pay.
The Swedish Building Workers Union (SBWU) demanded that a local collective agreement that covered Swedish building firms should be in place.
However, Laval refused and referred to a Latvian agreement instead which paid about a third of the Swedish wage and did not provide adequate insurance.
As this was a clear case of ‘social dumping’, the SBWU, with the support of other unions, began industrial action by blockading the site.
Laval argued that this action was not in compliance with EU law and brought the case to the Swedish labour court, which decided to ask for a ruling by the ECJ.
The court is to decide if industrial action in support of demands for a collective agreement is in compliance with EU law, notably Article 49 on freedom of movement to provide services.
While visiting Stockholm, EU internal market commissioner Charlie McCreevy made clear that the commission fully backed the Latvian company and the "social dumping" that it had created.
"If member states continue to shield themselves from foreign company takeovers and competition, then I fear that the internal market will begin to dissolve.
"The question here is whether or not Sweden has implemented Article 49 in the treaty on free movement," he said.
Understandably, the Swedish TUC (LO), which backed euro membership in a 2002 referendum when the people rejected it, has indicated that it would withdraw support for Swedish EU membership altogether if the court rules against collective bargaining legislation.
LO vice-president Wanja Lundby-Wedin points out that industrial action is, by its very nature, an obstacle to the activities of a company and free movement.
"However, the right to collective action is, together with freedom of association and the right to negotiate and conclude collective agreements, recognised as a fundamental right in international conventions," she said.
As a result, if the ECJ finds that the industrial action taken in Vaxholm is against EU law, it would have serious consequences and not just for Nordic industrial relations systems.
"What, until now, have been regarded as fundamental rights of workers in all democratic states would be undermined in the name of free movement,"said Lundby-Wedin.
The Viking case
The Viking case also involved industrial action by the Finnish Seamen’s Union (FSU). The employer in dispute was able to initiate proceedings before the British High Court due to the fact that International Transport Federation offices are based in London.
The employer’s claim was based on EU law was that the industrial action had violated the employer’s rights to freedom of establishment and to provide services, as provided in the EU Treaties, Articles 43 and 49.
The FSU invoked the Finnish Constitution which protects the fundamental right to strike. At first instance in the High Court in June 2005, the judge upheld the employer’s complaint that EU law overrode any national law, even the national constitution of a member state.
Both these cases highlight how EU Treaty provisions on free movement is being used as a battering ram against the trade union rights to take collective industrial action even if it is lawful under national law.
The “free movement of labour” and the attack on pay
"It is an iron law of economics that an abundant supply of labour pushes down its cost. It is insulting people's intelligence to pretend otherwise," statement by the Irish Congress of Trade Unions
Alongside the free movement of services, Brussels is pushing for the complete free movement of labour, moves that will have profound effects on all trade unions operating within the EU.
Following the accession of eastern European states to the EU in May 2004, Ireland, Britain and Sweden allowed unrestricted access to their labour markets. As a result, migrant labour has been rapidly moving west while capital and manufacturing jobs are moving east.
These three countries are experiencing a large influx of migrant labour while east European countries are suffering population falls and an inevitable brain drain.
In Latvia alone, over 50,000 people have left a country of less than two million, leading to a loss of skilled labour and young people as well as an uncertain future of underdevelopment.
In the three western states, meanwhile, wages have been under pressure in many sectors in a process known as ‘social dumping’, as cheap foreign labour replaces the indigenous workforce and trade union bargaining power is severely weakened.
These problems have arisen in Ireland, most notably in the Irish Ferries dispute, when the company announced it was replacing 600 Irish seafarers with sweated labour from Eastern Europe at considerably lower rates of pay.
This provoked huge protests across Ireland and even Irish premier Bertie Ahern was left wringing his hands about the injustice of the situation. Yet the Irish government is supporting the introduction of the Services Directive which would accelerate this kind of ‘social dumping’.
Over a quarter of a million migrants, mainly from Poland and Latvia, now work in Ireland for cash pay, which considerably less than the legal minimum wage.
Ireland is now facing the problems that arise from merging a labour force of just two million with an east European labour force of over 70 million.
The Irish Congress of Trade Unions is demanding measures to protect particularly unskilled workers where social dumping is threatening jobs.
"It is an iron law of economics that an abundant supply of labour pushes down its cost. It is insulting people's intelligence to pretend otherwise," it said in a statement.
This theme was taken up as a source of satisfaction by Bank of England governor Mervyn King in 2005, when he declared that immigration from eastern Europe had "reduced wage inflation" in Britain.
"In an economy that can call on unlimited supplies of migrant labour, the concept of output gap is meaningless," he said.
This phenomenon will, of course, be exacerbated if Romania and Bulgaria join the EU in 2007 or 2008.
Across Europe, it is clear that we are witnessing large movement of capital eastwards as labour heads west. And this is happening in accordance to the principles of the single European market, which allow the ‘free movement of goods, capital, services and labour’, regardless of the social consequences.
Single market rules, therefore, truncate all forms of democracy, including rights to fair wages, working conditions, welfare and social protection and collective bargaining. These EU policies can only mean a continuation of mass migration and, ultimately, feed the poison of racism and fascism, the last refuge of the corporate beast in crisis.
The‘colonial’ brain drain
Drawing limitless supplies of labour from Eastern Europe is clearly a strategy for pushing down wages and conditions within the EU to enhance corporate profits.
Not content with this, Brussels plans to cream off the best talent from the third world by offering automatic rights to reside and work within the EU only to the very best students. EU commission president Jose Manuel Barroso has declared that he wants to "lure talent" from the South and to"capitalise on the lucrative international education market" by offering top African students instant EU citizenship.
In other words, it is cheaper for EU businesses to exploit education systems in the undeveloping world rather than train the local workforce. The resulting brain drain from some of the poorest and underdeveloped societies in the world is clearly very damaging.
Leading South African MP Kader Asmal has slammed the plans as"another form of discreet colonialism”.
"EU countries assist in developing higher education in the South and then wish to take the cream of the PhD students by seducing them with the offer of citizenship.
"This is not just a brain drain, but a destruction of the intellectual capital of the South," he said.
To reverse this increasingly perverse situation, all nation states must have democratic control over their own immigration policy and have the right to apply national legislation in defence of migrant and indigenous workers.
Capital moves East
“By 2008 Slovakia will be turning out 1m cars a year – compared with 1.6m in Britain this year. The reason is simple. The average gross wage a month for a car worker in Slovakia is £350 – compared with about £2,000 for assembly line workers at Ryton”
Financial TimesApril 20, 2006
The Services Directive is just one of many avenues that big business can use to their advantage to transfer production to where labour is cheapest. EU rules on ‘state aid’, which companies receive from governments, are regularly implemented in an arbitrary and partisan way to benefit transnational corporate interests.
For instance, the planned closure of Peugeot’s UK plant in Ryton in 2007 and the shift of production to Slovakia is not an “inevitable” casualty of ‘globalisation’ as prime minister Tony Blair has weakly claimed.
The death nail for Ryton began in 2002 when the UK government agreed a request of state aid of around £14 million to Peugeot so the company could build its 207 model in Britain.
Inexplicably, the European Commission sat on the request for two years and, as a result, millions of pounds of extra investment was also held up.
Meanwhile, in 2003, million of euros of state aid began being pumped into the new Peugeot/Citroen plant in Trnava, Slovakia. Peugeot switched production to France and now plans to move in Slovakia next year and over 2,300 more UK manufacturing jobs are set to disappear.
In other words, while Brussels sat on the UK request for state aid, it allowed funds to be poured into upgrading the Trnava site and its surrounding infrastructure.
The Slovakian government offered Peugeot £73 million subsidy, free land, construction financing, local infrastructure enhancement, a 10-year "tax holiday" and labour training subsidies, all backed by Brussels.
A Single Programming deal between the Commission and Slovakia also gave massive EU funding for transport links near the site.
The European Bank for Reconstruction and Development (EBRD) now says that Peugeot cited "proximity of quality transport links as one of the critical factors in picking Trnava".
In order to obscure these facts, the BBC ran a major story at the height of the controversy based on a single quote from an EU spokeswoman dismissing the idea that the EU had anything to do with Ryton's closure.
She said that the £78 million Slovakia received from the EU’s structural and cohesion funds could not have been passed on to Peugeot, claiming there are “very strict controls”.
However, the BBC report failed to report the real issue of "state aid”, which can come in various forms from the government as in the case of Trnava.
The tragedy at Ryton is the latest example of how capital and manufacturing is moving out of Britain in the interests of corporate capital.
Over one million manufacturing jobs have disappeared since 1997 as a direct result of the creation of the Single European Market and its strict rules that requires the “free movement of capital, services, goods and labour”.
Of course, when conditions in eastern countries such as Rumania, Bulgaria and Croatia allow, companies like Peugeot will move on to exploit these new regions with the connivance of EU institutions. The question then will be why can Asian workers toil at even cheaper rates?
The attack on pensions
“If they are not reformed soon, public pensions systems in many EU member states pose a threat to the competitiveness of the European economy…confidence in the stability and political management of Europe’s new currency will be undermined.”ERT report.
One of the services covered by the Services Directive is pension provision.
Not surprisingly, the European Round Table of Industrialists drew up plans long ago to create a market in pension provision as part of creating an internal market.
In 2000, the ERT produced a report on pensions to lobby the EU Lisbon summit.
The report, European Pensions:An appeal for Reform, urged Brussels to order member states to lift retirement ages, stop early retirement and encourage individuals to save for their retirement through tax breaks and private pensions schemes.
"If they are not reformed soon, public pension systems in many EU member states pose a threat to the competitiveness of the European economy", the report said.
EU heads of state dutifully complied by agreeing the ‘Lisbon agenda’, which represented an orgy of privatisation and called for the harmonisation of national pension strategies.
“Member states have to prepare for the challenge of accelerated demographic ageing which will make it more difficult to provide adequate pensions in a financially sustainable way,” the European Commission declared.
In December 2001, a set of eleven common objectives for the ‘modernisation’ of pension systems were adopted as a basis for harmonisation.
In other words, no sooner had the ERT spoken in 2000, than the EU’sReport on Adequate and Sustainable Pensions appeared, echoing the ERT’s simple objective of making us work longer and harder for less.
“Achieving the general employment targets set in Lisbon will not be possible without increasing the employment rate among older people.
This makes it necessary to adapt pension systems and other aspects of tax/benefit systems to encourage people to remain in work longer,” the EU report said.
It went on to link the pension issue with the need to cut public spending.
“Achieving high employment levels will, in many cases, not be sufficient to prevent a substantial increase in public expenditure on pensions as a proportion of GDP,” it said.
By 2003, Brussels issued Directive 2003/41/EC to force pension funds to comply with the internal market principles of free movement of capital and free provision of services.
It allows pension funds to manage occupational schemes for companies established in another member state and allows a pan-European company to have one pension fund for all its subsidiaries. This liberalisation of the pension fund market was accompanied by concerted attacks on state pension provision in all member states.
Unelected employers groups ordered the EU in 2000 to reduce the pension cost for the state and for employers. The EU then tied in national governments to the agreement in 2001 and each state obeyed the orders and started to attack pensions.
The Treasury’s ‘‘National Reform Programme’ published in October 2005 (www.hm-treasury.gov.uk) declared that “the government has proposed an increase in the normal pension age of public sector schemes from 60 to 65”.
This was the UK response to the Integrated Guidelines package endorsed by the EU Council in June 2005. This document is designed to meet the requirements of the updated Lisbon Action Plan issued by the EU’s Spring European Council 2005 SEC (2005) 192.
Under the heading, ‘Developing active aging strategies’ it requires member states to ensure the“suppression of early labour market exit”. These proposals were incorporated in the proposed Directive on Occupational Pensions.
The UK response supplies detailed answers on steps to increase the working age and hand pension provision in order to complete the EU’s single market. This is designed to force workers to work longer and rely on inferior private pensions based on the vagaries of the stock market.
Social partnership or independent trade unions?
“There is a mutual interest in getting this idea of European Union across. The European Commission needs the trade unions to implement European Economic and Monetary Union”European TUC spokesman Alfons Grunheber-Pilgram
The Services Directive represents a wholesale attack on welfare, education and social structures which trade unions and working class organisations have fought hard for over decades. So what should the response of the labour movements in Europe be to this latest onslaught?
The EU strategy is clearly to use the free movement of labour, capital and services to dilute, undermine and even destroy hard-won labour standards and public services.
This neo-liberal drive will increase ‘social dumping’, displacing workers with cheap foreign labour and feeding racism and the far-right.
The British and Irish governments back the Services Directive despite opposition from the vast majority of trade unions in London and Dublin.
TUC policy, decided overwhelmingly at the 2005 Congress, is to oppose the EU Constitution, the Services Directive and other neo-liberal EU diktats which demand the privatisation of the railways, post office and other essential public services.
Despite this official policy decided at Congress, TUC general secretary Brendan Barber found it possible to welcome the so-called ‘watered down’ Services Directive in a press release as a “major victory for social Europe”.
Such as response betrays a desire by the TUC to create a common front with EU institutions to advance the EU agenda. This is a central tent of the ‘social partnership’ agenda – a world where trade unionists and EU bosses and eurocrats are supposedly equal ‘partners’.
However, resistance to the EU’s corporate agenda and the Services Directive are appearing across Europe.
In France, following huge political pressure from the labour movement, the Europhile government called for the withdrawal of the “country of origin” principle and declared“the Directive must not undermine the rules applicable in France in the area of employees’ rights”.
For the same reasons, former German Chancellor Gerhard Schroeder warned that“the contents of the directive put fear and horror into the hearts of people” while the right wing Austrian Chancellor has stated that he could only support a directive text that would“prevent social dumping”.
However, the whole point of the directive is to create exactly these conditions.
These responses reveal a growing level of unease among working people to EU rules that shift the balance of power massively to the employer and big business and away from elected parliaments.
As a result, the validity of ‘social partnership’, where bosses, hand-picked union leaders and eurocrats draw up laws for over 500 million people across Europe without a democratic mandate to do so, should no longer be taken seriously.
We have to ask ourselves, how can workers’ have the same interests as private corporate entities that lobby EU institutions to make it easier to exploit staff and bring down wages?
Endless academic papers on the need for social partnership and declaring the end of class struggle cannot hide the fact that trade unions should not be in the business of promoting rules drawn up by big business.
These policies only favour corporate capital and the drive to maximise superprofits by exploiting cheap labour within the EU and around the world.
However, the European TUC, which is 80 per cent EU-funded, openly colludes with the commission and employers groups to promote this damaging corporate agenda. Is this really what European workers want?
It is widely believed that trade unions should exist primarily to represent their members’ interests, not to act as a conveyor belt for the policies of unaccountable and remote EU institutions.
This government, in common with previous administrations and some trade union leaders, have blindly promoted EU policies and failed to protect those they should be representing.
The alternative is for trade unionists to develop their own democratic agenda based on the interests of their members and their communities. Trade unions have an important and legitimate political role to play as agents for social change, not as the neutered partners of corporate interests.
The Service Directive is not yet a reality and millions of workers’ are finding the confidence to say no to ‘social dumping’ and yes to protecting national standards.
In order to protect jobs and this country’s industrial base, trade unions should be demanding that the government invests in manufacturing, training, research and development.
Manufacturing could create the wealth required to finance and develop the welfare state including a public health service that is free at the point of use, education and decent pensions.
All governments must have the democratic powers to control the flow of capital, jobs and people even if it offends neo-liberal EU rules, laws and directives designed to favour corporate capital. These are the fundamental rights of any modern, democratic independent nation.