Tuesday, February 10, 2009

EU's struggle to maintain border-free market

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 labor.

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 and trying to hold back the single market that protects Britain 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 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 rules of free competition.

Taking France’s lead, Italy announced 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 second mandate.

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 religion’s dream of catching up with western countries evaporates.

The Commission which the policies EU members’ public finances has already been easing up on governments about their deficits, which have spiraled in the face of costly bank bail-outs and economic stimulus measures. Under pressure from several countries, the commission has accepted that governments’ deficits will balloon well over the three per cent of output that they are supposed to respect.

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