Vaxholm and the race to the bottom

While the European media was all hyped up with Tony Blair's latest performance in the European Parliament, I must admit I was more taken up by another part of last week's session in Strasbourg. I was eager to hear what José Manuel Barroso and Internal Market Commissioner Charlie McCreevy had to say about the Vaxholm case.

The case deals with a Latvian construction company, Laval, which won a contract in Sweden. The Swedish construction workers union - Byggnads - insisted that the Latvian workers subcontracted on this project should benefit from a collective agreement and that this agreement should be according to Swedish standards. These conventions were to apply also on the salary structures and levels. Laval refused to do that and Byggnads blockaded the site. The Swedish Social-Democrat government endorsed the trade union's stand and said it would take the necessary measures to defend the country's social model. As a result, Laval could not fulfil the contract and filed for bankruptcy. The case ended up before the Swedish courts which have asked the European Court of Justice for its opinion on Community law considerations in this case.

The Irish commissioner made waves when he visited Stockholm and went on record saying that he favoured the Latvian company's point of view on the case, namely that the issue of collective bargaining put forward by the Swedish trade union was a barrier to free movement of labour and services. He reportedly went on to denounce the incompatibility of the Swedish social system with the fundamental principles of the European Union. The Swedish government and the whole European left wing movements rallied against Mr McCreevy's statements. The Group of the European Socialists summoned the commissioner and his boss to the European Parliament to clarify their position.

Both Mr Barroso and Mr McCreevy shied away from debating the issue in a direct fashion, given that the case is being considered by the European Court of Justice. They would not even be drawn on what the Commission would tell the court. "It depends on what questions they will ask us," the Commission president said.

To me it is obvious that this will not be the first and last case of the sort. Given the current economic downturn in Europe and the increasing social pressure, member states will find themselves in similar situations where they will have to take strategic decisions which might not be fully compatible with the current EU rules.

During the past months I have come to know Mr McCreevy quite well. I do not share the view of many of my Socialist colleagues that do not regard him very positively. Of course, he comes from the right side of the political spectrum and might be too economically liberal for our tastes. Nevertheless, he speaks his mind and he is a doer. Unfortunately, I do think that even though his comments on the Swedish social model were uncalled for, his stand in favour of the Latvian company is technically right. That is where the fundamental problem lies. I do not think that Europe can pretend for much longer that the rules it has adopted decades ago in different circumstances can be viable in their entirety without the slightest change in the context of an enlarged - and still growing - European Union.

If there are rules that must be changed or clarified in order to protect social standards and cohesion, then let us change them. Let us do it before the European citizens grow even more alienated from a Union they do not see as reflecting their aspirations well enough.

It is not a matter of putting a Swedish worker against a Latvian one, or a Bulgarian worker against a Maltese. It is a matter of protecting and increasing social standards. It is a matter of seeing that social considerations prevail over purely profit calculations.

Europe should not take the form of a race to the bottom. The country and the continent we want are ones that focus on raising both social and economic standards.

Mr Muscat is a Labour member of the European Parliament.

www.josephmuscat.com