The European Parliament voted today to water down a fiercely contested bill to open Europe's services market to cross-border competition, despite warnings from business and eastern Europe.
The European Commission says opening up services could generate 600,000 jobs and boost the bloc's economy by between one and three per cent. The main business lobby, UNICE, argued the amended version would lose most of that benefit.
Services make up around two thirds of the European Union economy but companies face many barriers when trying to operate outside their home country. The bill covers trades as diverse as hairdressing, software engineering, plumbing and catering.
It had been broadly rejected by Irish unions. The Irish Congress of Trade Unions wanted stronger legislation to protect employment standards and to prevent job displacement from workers coming from low-wage economies.
The employers' body Ibec was against any changes that would make the labour market more inflexible.
The two main factions in the EU assembly in Strasbourg, the centre-right European People's Party (EPP) and the socialists, backed the change to appease west European labour unions. MEPS voted by 394 in favour and 215 against, with 33 abstentions, to a heavily amended version of the directive that was first proposed by former EU Internal Market Commissioner Frits Bolkestein.
A broad majority voted to remove the most disputed "country of origin" principle, under which companies that provide services in another EU state would have been able to do under their home country rules only.
As amended, companies will be free to provide services in any EU country but will have to respect the labour, health, safety and environmental standards of the host country - often stricter in western Europe than in the poorer new east European member states.
EU Commissioner for the Internal Market Charlie McCreevy welcomed the result of the vote, which he said had been the subject of a "lively and vigorous" debate.
"With the broad consensus reached on key aspects of this proposal the European Parliament has provided us with a solid basis for going forward. This represents a real advance, a step that no one would have believed possible just 12 months ago. I believe that today's vote demonstrates that there is a willingness in Europe to pursue measures to deliver more jobs and growth."
Fine Gael MEPs Simon Coveney and Gay Mitchell both welcomed the result of the vote. "This will facilitate job creation and increased economic activity in the services sector across the Union," said Mr Coveney.
Despite the directive being diluted, Mr Mitchell said it was "good news" for the people of Europe. "The directive does not go as far as it could have in liberating the services sector but it is about as far as Parliament could go," he said.
Labour's Proinsias De Rossa said the vote was a "victory for those of us who sought fundamental change" to the directive. He said Labour has always been opposed of the "country of origin principle" and the threat of a "race to the bottom" has been defeated.
"Opposition to the Bolkestein Directive is a clear sign that citizens will not accept Europe-lite - a single market with no solidarity or social inclusion," he said. "People want the freedom to work anywhere in Europe they choose, but they expect us to ensure that the work is decent, with decent conditions, so they can live decent lives."
But Sinn Féin MEP Bairbre de Brún described the directive as a bad deal for Irish workers. She called on the Labour Party to explain why it voted in favour of an agreement that she claimed would lead to the privatisation of public services.
"Over this past number of years there has been a steady drive to promote a right wing agenda in Europe, the effect of which has been to prioritise profit at the expense of workers' rights and public services," she said. "This directive is another consequence of that thirst for private monopolies."
Additional reporting: Agencies