Economic crisis tests EU's golden rules

9th February 2009, Comments 0 comments

The UK strikes against foreign workers while France toys around with ‘Buy France’ aid plan – is this the start to the end of EU’s border-free market for goods, services and labour?

BRUSSELS – With British strikes against foreign workers and France hinting at protectionism in the car sector, the economic crisis is putting the EU's golden rules of free movement of workers and trade to the test.

So far the European Commission has played its role as guardian of the European Union's treaties, defending the bloc's single, border-free market for goods, services and labour.

In the face of British wildcat strikes against Italian and Portuguese energy sector workers, the EU executive said last week that "it's not in creating barriers now and trying to hold back the single market that we protect ourselves against the crisis."

It also warned against French plans to support the car industry, after French President Nicolas Sarkozy said there would be no aid for carmakers that "turn around and open a new factory in the Czech Republic or somewhere else."

Czech Prime Minister Mirek Topolanek, whose country holds the EU's presidency, hit back with "serious doubts about political involvement in the management of commercial companies and breach of the rules of free competition."

"The attempts to use the financial crisis to introduce such forms of protectionism and protective measures may slow down and threaten the revival of the European economy," he warned in reaction to Sarkozy's statement.

Taking France's lead, Italy announced on Friday similar conditions for aid to its automobile industry.

The trend is putting growing pressure on the commission to be more flexible about government support for struggling industries just as its president Jose Manuel Barroso and other senior staff seek a second mandate.

"The commission is going to be under tremendous pressure and it shouldn't react in a panicky way," said analyst Simon Tilford at the Centre for European Reform, a London-based think thank.

"We are certainly going to have more unrest than what we have had," Tilford predicted. "There is a real sense of anger at the incompetence in the financial sector."

While unemployment rockets in Spain, Italy and Greece have already seen riots.

Meanwhile the temptation of "populist" policies in eastern Europe could become huge as the region's dream of catching up with western countries evaporates, Tilford said.

"There's pressure pushing in the direction of the nation," said analyst Iana Dreyer at the European Centre for International Political Economy, a Brussels think tank.

The commission, which polices EU members' public finances, has already been easing up on governments about their deficits, which have spiralled in the face of costly bank bailouts and economic stimulus measures.

Under pressure from several countries, the commission has accepted that governments' deficits will balloon well over the three percent of output that they are supposed to respect.

It also relaxed European state aid rules in December so that governments could ratchet up support to credit-starved, cash-strapped companies.

"You won't see scrapping of the rules but you will see bending," said analyst Katynka Barysch at the Centre for European Reform.

"So far the European Commission has been quite good at defending," she added. "Nobody is even remotely saying that the EU should not have free trade and that free movement of workers should stop."

[AFP / Expatica]

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