I must justify my opinion that the progress made towards a European consensus on free competition and on the limits of the role of political authorities in the economy is the result of a gradual rapprochement between Brussels and Paris, and not of the French falling into line on the most “liberal” ideas (see this column of yesterday). With his habitual, slightly ironic half-smile, Mario Monti said that the meeting had taken place… in Lille (geographically closer to Brussels than Paris, and also located on the Brussels-London route). I am less gifted in dialectics but a long-time observer of developments in Brussels, so I will rely on a few recollections.
Developments in Brussels. For a long time the term “industrial policy” was forbidden in Brussels because it gave the impression that Europe was pondering Soviet-style “five-year plans”. The name of the Directorate General responsible for industrial policy was changed to “enterprise and industry”. Nowadays the Commission vice-president Günter Verheugen, is in charge of it, and he is not afraid of the term industrial policy, and nor is anyone else in Brussels.
European reflections on the status of electrical energy, railways, postal services, telephone services, etc have been hampered for a long time because the French term “public services” was assimilated into support for less favoured sections of the population in some member states. It was necessary to create the definition “services of general economic interest” (SGEIs), which has subsequently been used in all EU documents in order to avoid misunderstanding (although the term “public service” is still widely used in France) and start serious discussions. It has taken many years for concepts such as “universal service” to be recognised at European level and for the European commissioner for competition (at the time Mario Monti) to recognise that SGEIs represent “one of the pillars of the European social model.” The new treaty which will be signed next month in Lisbon will definitively confirm the significance of these services as well as the principle of universal service, and will recognise the derogation from the competition rules which confirms the legality of the vital public funding ensuring that businesses responsible for SGEIs can accomplish their tasks. Differences persist on the implementation, but the principles are now accepted: much remains to be done, but the achievement is nonetheless impressive.
The key role of the Court of Justice. The development of the principle of free movement of goods has been extremely important. This is clearly an intangible principle, the very basis of the common market, and the Court of Justice played a key role in facilitating its application, notably through its Cassis de Dijon judgement, which freed the EU from perpetual demands for harmonisation. But later on, once the great market had become a reality and its foundations were solid, it was the Court of Justice itself which allowed the derogations considered necessary to respond to demands such as consumer security or safety, environmental protection and even respect for traditions (as long as these are not discriminatory). Member states other than France have played a key role (e.g. Denmark in the environmental aspects), where the European Commission sometimes sided with strictness; but although the protagonists may change, the point of departure remains the same: taking account of considerations which sometimes go beyond the letter of the law.
The history of Court judgements which have shown the way has already been set out in this column, in particular in our bulletins 7571 (October 1999), 7906 (February 2001) and 9359 (February this year). I will therefore restrict myself to recalling that in a “Jean Monnet” university symposium in 2000 a study was presented on “the non-economic factors in the case law of the Court of Justice”, which indicated that the Cassis de Dijon judgement of 1979 “posited the principle that certain obstacles to the free movement of goods are legal in as far as they seem necessary to satisfy imperative demands”, citing in particular the protection of public health and of consumers, and that subsequent case law had broadened the list of imperative demands notably by extending it to social policy, cultural policy and the environment. In particular, the study considered that following the Danish bottles and Walloon waste judgements it was established that “environmental protection trumps the principle of free movement of goods”.
Recent developments. Several later developments, some of them very recent, confirm the rapprochement between the extreme starting points. The more spectacular of these have been: a) the suggestion by Trade Commissioner Peter Mandelson aiming to legitimise the golden share to control takeovers of strategic European enterprises by sovereign funds (i.e. linked to national authorities) from countries such as China, Russia, and other major oil-producing countries), b) the partial conversion of Charles McCreevy, the internal market commissioner, who has renounced the principle of one share, one vote in the management of enterprises and the idea of European legislation on the transfer of registered offices, and who accepts the idea of a European private company statute, which was demanded by small and medium-sized enterprises (see this column in our bulletin 9520).
I could cite other examples, particularly from the energy sector. And it is once again the Court of Justice (in this case the Court of First Instance) which in practice considered legal the German system whereby the state recompenses losses suffered by public hospitals (see our bulletin 9469 from July). A private hospital had attacked the system, believing that it constituted illicit state aid. The Court judged that the system was not disproportionate in view of the objective of maintaining differentiated health services on the national territory, and that the Commission had been correct not to open the formal investigation demanded by the private hospital. A previous judgement by the Court had ruled that as long as certain criteria are respected, state support for services of general interest (SGIs) does not constitute state aid; the European Commission bases its regulation exempting certain categories of subsidies from obligatory notification on this case.
The Court of Justice's Volkswagen judgement (of last month, see our bulletin 9529) declared illegal that company's provisions, which placed a ceiling of 20% on shareholders' voting rights (even if a shareholder holds a higher percentage of the capital) and set the blocking minority at 20%. These provisions represented an infringement of free movement of capital, which is enshrined in the EU Treaty. However, it should be stressed that this judgement refers explicitly to the rules linking the member states in the context of the single market, specifically stating that the illegal situation “is likely to dissuade investors from other member states”. Consequently this situation could be legal with regard to investors from third countries (see the idea of reintroducing the golden share with regard to sovereign funds already mentioned).
More member states involved. To conclude this overview, I would stress that France is not isolated. The double rapprochement Paris/Brussels and Brussels/Paris is a symbolic image; in fact, other capitals could also be mentioned. Some member states even go further than France for certain aspects, and believe that the consideration of “non-liberal” aspects by the Court of Justice is not sufficient. For example, in June Sweden criticised the Court's condemnation of the Swedish alcohol monopoly for the limits imposed on imports of alcoholic beverages by individuals, as it believes that controls of such beverages should take precedence over the free movement of goods.
The French position. The response from the French Secretary of State for European Affairs, Jean-Pierre Jouyet, to Mario Monti's comments confirmed that France fully accepts the competition policy, believing that Europe needs them as a means to achieve its objectives and not as an objective in itself; the other member states have understood this by accepting a change in this direction in the new Treaty, and the Court of Justice has acknowledged this. But there is still a need for reflection on the balance between competition policy and other policies. In some cases this has already been achieved, in others it has not yet, and Mr Jouyet cited three “points of friction” which persist between his government and the Commission: a) for energy, a happy medium must be found between securing provisions and competition. France is firmly opposed to separating production and distribution; b) the application of the concept of universal service for services of general economic interest (SGEIs) must be made stronger and more specific; c) the balance between competition and European cooperation in the space and defence industry sectors must be clarified.
Moreover, there remains much to be done to create a European consensus on a competition policy which is compatible with Europe's external policies; there is a need to reflect on all the aspects to articulate it correctly; and Mr Jouyet cited the case of sovereign funds.
For his part, MEP Alain Lamassoure, who is to-the-point and often caustic, assumed a position in favour of: 1) SGEIs (public services of general interest) at European level; 2) a common market which does not solely target the short-term interests of consumers by reducing the role of producers and thereby permanently reducing salaries; 3) a correct evaluation of environmental and social dumping by third countries. But Mr Lamassoure above all stressed certain prejudices held by his fellow citizens and the part of the political classes for whom a project which is good for business is automatically bad for employees. But these are internal affairs in which it is not my place to intervene.
(F.R.)