With growth equivalent to 2.8% a year, services, in both the public and private sector, represent more than 70% of gross internal product in Europe, and employ around 66% of the continent’s working population. Yet, the service sector constitutes only 20% of the total of inter-community trade. It can be deduced from these figures both that services are truly the driving force of Europe’s economy, and, particularly, why the service sector finds itself at the heart of political debate. Being the ultimate public affair, services are a focal point for both market forces and for politicians. This clash of interests is not made any easier by the lack of a common definition amongst Member States.

The definition of public services in Europe : the same yet very different

The debate about a common definition originates from the fact that the concept of services of general interest differs hugely in different Member States. Political, economic, legal and cultural factors all play a part in creating these diverse notions.

To give an example, in the United Kingdom the term “public service” in the singular refers to the government, its departments and their employees, while “public services” in the plural concerns the services provided by the local authorities or by the national government, such as health, education, and law enforcement. However, in Scandinavian countries such as Sweden and Finland, considered unanimous champions of the welfare state, the notion of public services does not even exist. As these examples clearly show, there is no dictionary which provides a common definition of the concept of public services for all the EU’s 23 languages. The fact that “public” can refer to those receiving the services or to the public authorities responsible for managing them certainly doesn’t help.

Semantic issues aside, there is also a lack of a precise definition for the two terms “services of general interest” (SGI) and “services of general economic interest (SGEI), in EU primary legislation, in secondary legislation and in case-law of the European Union Court of Justice.

It is clear that, as there has been no public discussion about adopting a common definition, a confrontation has arisen between the Community institutions, with their many sensitivities and different visions for European integration. In this way, the market has, little by little, filled the void left by politics.

Two conflicting agendas : from politics to the market

To help avoid possible misinterpretation, the concepts of SGI and SGEI are to be distinguished from the less precise idea of “public service”.

Often confusion is rooted in the fact that services for the general public are identified with the companies which provide them, which are in general state-owned. This is the case in France and Italy, for example, where public services such as health, education, transport and electricity networks have been an important factor in both social and economic progression since the Second World War. In these two countries, for the sake of solidarity and social cohesion, the “welfare state” took it upon itself to provide services such as these, which, due to natural market inefficiencies, could not have otherwise been provided to the public at large.

In addition, this collectivisation of services has also contributed to strengthening the feeling of belonging to a national community ; thus in many continental European countries, the sense of identity linked to services still has an important value in the national psyche, as is the case in France.

Michel Barnier

source : www.flickr.com © Michel Barnier

Since the Treaty of Rome was drawn up in 1957, the European institutions have preferred the term “services of general economic interest” rather than the “traditional” term public services. From an economic perspective, the SGEI have been subject since 1957 to the principles of free circulation and competition imposed by the rules of the Treaty. Nevertheless, the application of this principle for services remained a dead letter at least until the Single Act was signed in 1986.

Less well known politically, the notion of SGEI does not inflame national sensitivities and creates a distinction between the objective (general interest) and the form (public and private) of the services in question. Such an idea reflects a typical functionalist vision which could today be defined as a community vision, based on the search for a balance between competition and serving the general interest.

The Amsterdam Treaty would specify in addition that SGEI were “economic activities that are considered to be of general interest and yet are submitted to public-service obligations”. Today, this category includes private businesses with whom the government have concession arrangements for a service of general interest, such as, for example, the big distribution networks (energy, telecommunications) and transport networks (post, railways).

The election of the Conservatives in Great Britain at the end of the 1970s and, ten years later, the swing towards neoliberalism on the part of the social democratic governments (think Jacques Delors in France and Romano Prodi in Italy) contributed to the stigmatisation of and consequent dismantling of the state monopoly on public services, deemed to be too expensive and inefficient. Given the questionable decisions of several of those charged with running these monopolies, the concept of “freedom of choice” for the public and “reduction of costs” made a free market seem like the best solution for promoting innovation and modernisation.

The long list of privatisations that followed the adoption of the Treaty of Maastricht (transport, energy, telecommunications) reduced public service in Europe to a minimum (health, justice, law enforcement), while the State took on the role of regulator.

Over the course of the last twenty years liberalisation has been accelerated even more by the case-law of the EU Court of Justice. Its sentences have had a marked neoliberalist character, and the Court has applied the letter of the law to the free circulation of services, as is provided for in the treaties. The European Commission and the Court of Justice have both played a key role in the progressive introduction of competition as a way of organising and regulating services of general interest. All this has been to the detriment of the influence of politics in the management of public affairs.

Is there space for political debate in the face of market expectations ?

As Philippe Herzog, advisor to Michel Barnier, Commissioner for the Internal Market and Services, recently reminded us, services of general interest are of fundamental importance when it comes to reinforcing social and territorial cohesion in Member States. The recent opening up to competition by the Commission brought to an end a debate that had been going on for at least ten years between the advocates of a free market and defenders of both local and national public powers.

The approval of the Services Directive in December 2006 (2006/123/EC), after almost two years of passionate debate and demonstrations, is an example of the conflict between the neoliberalist logic of the Commission and the more central positions of the European Parliament and several stakeholders.

In 2004, at the Commission’s suggestion, it seemed that the moment had arrived for the modernisation of services of general interest, via the liberalisation of the SGEI and the regulation of government aid for financing public services. The Commission was aiming to exploit the potential for exceptional growth in the service sector by abolishing the legal and bureaucratic obstacles that prevented a provider of services in one Member State from establishing themselves in another.

However, the Commission’s proposal met with a lot of opposition, including the left-wing parties in the European Parliament, numerous NGOs and the European Trade Union Confederation (ETUC). The reason for such a defensive response were political.

First of all, according to these groups, problems arise first when the “obstacles” to be abolished end up endangering internal regulations in Member States, especially those which protect workers’ rights. In actual fact, this issue had been raised from the moment that the “country of origin principle”, proposed by the ultra-liberal Commissioner for the Internal Market, Frits Bolkestein, was approved. Secondly, critics argued that the criteria of free and undistorted competition had endangered the existence of services which were not yet open to competition, such as social services, often organised and managed by local authorities and thus fundamental for social and territorial cohesion.

The case of the Services Directive is not an isolated one. Confronted by the positions taken by several Member States and the European Parliament, the Commission was obliged to clarify the importance of the concept of SGI and SGEI. Even during the negotiations before the Amsterdam Treaty, for example, a communication from the Commission was published which declared that SGEI represented the “common values of the Union” in that they contribute to “social and territorial cohesion”. The White Paper on public services in 2004 underlined for the first time the need to “ensure the harmonious combination of market mechanisms and public service missions”. According to Pierre Bauby, advisor to the Secretary of CEEP, a lobby representing the providers of services of general interest, despite the Commission’s attempts at clarification, there are still numerous grey areas in the definition of services of general interest, which brings with it the risk of handing control of some public services to the free market.

The role of the European Parliament in defending the prerogative of public services

Compared to the somewhat liberalistic positions taken up by the Council and the Commission, the European Parliament has always been more inclined to defend public services, due to the democratic legitimacy with which it is invested and the greater institutional powers handed to it by the Treaty of Lisbon. In response to these expectations, in 2009 the Parliament internally set up an intergroup on public services, whose President was the French MEP Françoise Castex and which was composed of 50 MEPs from six different parties (S&D, EPP, Greens/EFA, ALDE, NUE/NGL), coming from thirteen Member States. The principle objective was to put pressure on parliamentary commissions until a framework directive was adopted on social services of general interest, which had been weakened by the measures adopted by the Commission in 2005 (Monti-Kroes package) aimed at regulating State aid for businesses with concession contracts for providing SGEI.

Françoise Castex

Source : www.flickr.com © GUENGL

Another step towards bringing the discussion about services of general interest into the field of political - and thus democratic - debate was accomplished with the introduction of Article 14 and the adoption of Protocol 26 in the Lisbon Treaty. The text confirms “the shared values of the Union in respect of services of general economic interest” and “the essential role and wide discretion of national, regional and local authorities ” in the organisation and provision of these services. These documents highlighted the fact that the notion of SGEI was rather wide and vague and not exactly well known at a political level, thus allowing the concept of public services to narrow or expand depending on the lesser or greater role played by the state in each country.

The partial return to public management of services would correspond with what was stated last October by Michel Barnier, who underlined the importance of SGEI as factors for stabilising the economy in the current period of crisis. The single market for services has shown itself to be incapable of offering those solutions (lowering of costs, improvement of quality, innovation) that many politicians and business people expected from their liberalisation.

Yet, in spite of the progress made towards creating a common definition of services at a local level, the challenge becomes all the more arduous the greater the expense is for Member States. The austerity measures imposed on governments are detrimental to quality, access and universality of services, exactly when it would appear to be more urgent than ever to form solid ties at a social level and help the economic recovery of the European Union.