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The On-Going Liberalization Agenda

Sectoral Liberalization: Old and New Frontiers

The previous section has shown that contestation vis-a-vis the Services Directive can be regarded as a success story from the point of view of the advocates of regulated capitalism in Europe. Yet, it has also been implied that this victory was, in some respects, mainly political and symbolic. With regard to the liberalization and regulation of welfare services, the configuration left by the adoption of the Services Directive in December 2006 remains highly ambivalent. As shown above, a majority of decision makers within the Commission, the Council and the EP objected the recognition of a single, unified category of SGI. In fact, the Services Directive accentuated the existing fragmentation by introducing new categories—such as the NESGI—which only served to further restrict the scope of services which cannot be affected by EU competition law to those services which are regarded as core state prerogatives (social security, police, justice, etc.). Similarly, the conclusions of the European Council meeting in March 2005 reflect fundamental ambiguities with respect to the marketization of welfare services: the claim that ‘effective services of general economic interest have an important role to play in a competitive and dynamic economy’ can be understood in different ways. On the one hand, it seems to stress the key role of SGI and thus address the directive’s opponents concerns; on the other hand, the terms ‘effective’ and ‘competitive and dynamic economy’ seem in tune with the modernization through marketization narrative. Against this background, the aftermath of the ‘Bolkestein’ debate is characterized by ongoing initiatives at the EU level for bringing forward sectoral liberalization. It has been argued that, in the context of the legitimacy crisis of the EU, the EU Commission was

‘shifting narratives’ towards greater attention paid to citizens’ concerns and calls for a European ‘social market economy’ (Lianos and Gerard 2012). However, little evidence can be found for substantiating the rhetoric pampering which accompanies the Commission’s current approach to the Single Market. Recent initiatives for ongoing sectoral marketiza- tion through liberalization rather point to the continuation of previous patterns of policy making and resistance. We look at two areas which epitomize the old and new frontiers of marketization policies: transport networks (railway in particular), on the one hand, and healthcare services, on the other.

A typical area where sectoral liberalization has been carried forward over the past few years is that of transport networks which were at the core of the Single Market Act, the strategy put forward by the European Commission in 2011 to revive the Single Market policy agenda. Hence, a main objective is to further market integration in the realm of both transport (maritime, rail and air) and energy (electricity and gas). Railway transport remains one area where there has been much resistance to market opening as incumbent operators (read former national companies) have attempted to maintain their monopoly on passenger transport. With the Single Market Act, the Commission therefore proposes to tackle such persisting ‘market fragmentation’ by putting forward a fourth railway package. The underpinning market rationale remains the same, namely that competition leads to more efficiency and hence lower costs for consumers and taxpayers (or states):

Open domestic rail passenger services to operators from another Member State to improve the quality and cost efficiency of rail passenger services (...) Experience in Member States which have introduced market opening for domestic passenger services shows that competition in rail transport led to important efficiency gains, in particular in incumbent railway undertakings. This led to substantial savings in public funding for rail services under public service contracts, which could reach 20—30 %. (European Commission 2012, p. 6)

The fourth railway package (2013a) was put forward by the EU Commission in January 2013. Its adoption is still pending at the time of writing (most legislative pieces composing the package are still waiting for a first reading by the Council), mainly because this crucial step for accelerating the liberalization of railway transport causes much political debate. The two main contentious aspects of the Commission’s proposal have been the obligatory and full unbundling of the infrastructure manager and the services provider, on the one hand, and the obligatory competitive tendering for railway transport services, on the other. Both measures aim at improving the possibilities for foreign providers to enter domestic markets. Both provisions met much resistance. Unbundling was fought by railway companies which still operate with a relatively integrated model for managing infrastructure and services, and they enjoy the support of their national government. The Deutsche Bahn is known to have led a particularly aggressive campaign against the proposal, leading Angela Merkel to exert direct pressure on the Commission (Perier 2014). Germany was supported by other Member States including France, Luxembourg or Poland or the Netherlands. At the meeting for the first reading in the Council, the Dutch minister summarized concerns over the entry of private providers alongside historical railway companies by saying that ‘The Netherlands did not support mandatory tendering, and wanted to avoid the situation in which private operators could “cherry-pick” profitable lines to operate’.[1] Compulsory tendering met similar resistance. In a joint event and press release, the EP, the European Economic and Social Committee, and the Community of European Railway and Infrastructure Companies (the platform gathering nearly all companies dealing with passenger railway transport) claimed that investment and not competition was the key issue with regard to quality of service (European Economic and Social Committee 2013). In the same vein, railway transport unions gathered in the powerful European Transport Federation (ETF) denounced the ‘ideological’ approach of the EU Commission:

We criticise in particular that competition in public rail passenger transport will become compulsory for all EU Member States but social conditions and protection of staff will be left to the decision of the local authorities without any obligation. The European Commission confirms once more its ideological approach: a yes to market opening but no to the protection of workers’ social conditions. (ITF 2013)

The ETF initiated strike action in October 2013 and a demonstration in front of the EP building in Strasbourg which gathered about 3000

transport workers from 14 countries on the day where MEPs were discussing the package (ETF 2014). The report adopted by the EP in its first reading addresses many of these issues; for example, by maintaining the freedom for national authorities to award welfare services directly or through tendering, and constraining welfare services operators (whether public or private, domestic or foreign) to abide by local or national regulation of working conditions. An in-depth understanding of the issues surrounding marketization through liberalization does not consist of opposing public and private operators in a cartoonish way. In June 2014, 250 Swedish workers followed a strike call initiated by the main union SEKO: they protested against the plans of their employer who foresaw to lay them off and re-employ them under worse pay and working time conditions. Interestingly, the company contemplating such practices is Veolia, a large French company which recently entered the fully liberalized Swedish market and whose majority stakeholder is none other than the French State.[2] While the European Commission repeatedly cited the UK and Sweden as examples of successful liberalization, two Swedish researchers conducted a survey finding that 70 % of Swedes are favourable to the re-establishment of state monopoly over rail transport.[3]

Similar to railway transport, postal services have undergone gradual marketization through liberalization since the first directive from 1997. The Third Postal Directive was proposed in 2006 and eventually adopted in 2008. Although conflict-laden resistance seems to have waned, there was much debate about the right parameters for marching towards full liberalization, that is, the suppression of the ‘reserved area’ (i.e. letters and parcels up to 50 grams) which remained under the monopoly for national/former public providers. A northern coalition of Member States having engaged sooner with opening to competition (Germany, Finland, Sweden, the UK and the Netherlands) opposed a southern coalition which considered full competition as a threat to their national operator and users’ interests (Belgium, France, Greece, Hungary, Italy, Poland, Spain). The compromise consisted delaying full liberalization from 2009

to 2011 (and 2013 for countries with specific geographical issues) and a more flexible approach to state aid for funding the cost of the universal service obligation (delivery of mail at least once a day, five days a week on the whole territory). Yet, it remains to be seen whether funding would be sufficient for ensuring appropriate universal service (given that private operators do not want to contribute to compensation funds) and whether competition will not lead to further social deregulation through wage dumping rather than productivity gains and technological innovation. The proponents of competition have consistently considered the financial compensation and social standards as obstacles to fair competition. A recent report and data from Eurostat shows that, indeed, the postal sector has lost a fourth of its labour since 2004, which is only partially offset by job creation by new (private) incumbents and the development of new activities notably in relation with e-commerce (WIK Consult 2013). The same consultancy report, which serves as a basis for the mandatory review by the EU Commission of the implementation of the Postal Directive, does not include any in-depth evaluation of service quality on the ground, especially in terms of prices. Yet, its main conclusion is that market forces ensure adequate level of services quality and that regulation should be relaxed regarding: (a) the legal requirements for designating one universal service provider; (b) enabling a more flexible definition of universal service; (c) phase out the regulation of prices by national regulators. While the postal directives have often been cited as an example of re-regulation at the EU level, it remains to be seen whether, after achieving its liberalization agenda, the EU Commission will engage in a deregulation agenda for the postal sector in the years to come.

While rail transport and postal services constitute the known territory of marketization in the EU, healthcare has emerged as a new frontier which reaches out deeper into peoples’ lives and cultures. Accordingly, the adoption of pioneering EU legislation in this realm has been politically sensitive. Prior to a Commission’s directive proposal in 2008, the EU only affected healthcare policies through the coordination of social security systems in the event of patients’ cross-border mobility. Typically, this was always closely connected to the building of the Single Market and the related increasing free movement of people. The main policy mechanism is the granting by national governments of a prior authorization for patients who seek healthcare abroad but should be reimbursed by their social security scheme at home. In a series of judgements[4] at the end of the 1990s and early 2004s, the ECJ nevertheless challenged the Member States’ prerogative to refuse such an authorization—deeming, for example, that the wish to contain costs and maintain the balance of national healthcare systems could not systematically be invoked to deprive patients from treatment abroad (Greer 2009). The role of the Court, like in many other welfare services sectors, contributed to accentuating negative integration in the realm of healthcare since its decisions consisted of opening national boundaries and limiting national governments’ regulatory capacity in the name of the patients and workers’ freedom of movement (or mobility) within the EU Single Market. Hence, ‘the ECJ’s jurisprudence created the legal framework for actual market exchanges in an area in which such exchanges had not existed before’. In 2008, and following the exclusion of healthcare from the Services Directive, the EU Commission adopted a directive proposal for the application of patients’ rights in cross-border healthcare.[5] While patients’ mobility is still a relatively limited phenomenon today, the contentious nature of the directive proposal stems from a clash of paradigm between individual rights related to cross-border healthcare, on the one hand, and welfare states based on national solidarity, on the other (Ferrera 2005). In other words, the theme of ‘patients’ needs’ or ‘rights’ seems to converge with the consumer choice paradigm.

The debate over the directive proposal proved contentious. In the EP, critics were to be found mainly on the left side of the assembly (including the radical left GUE, the greens and the social democrats of the S&D) who contested the ‘market approach’[6] reflected by the Commission’s proposal. These objections crystallized in the demand for a dual legal basis, that is, for the directive to be grounded not only on the Article 95 TFEU, which guarantees market freedom, but also on Article 152 TFEU on health. A second demand was that Member States’ governments retain a large regulatory capacity, that is, the ability to issue—or indeed refuse— prior authorization for non-nationals to seek healthcare, especially in the case of hospital care or long-term treatment. The aim of possible restriction is to maintain a tight control on planning and costs within national systems. After these points were still contentious in the early stages of co-decision, the directive was eventually passed in 2011. While the final draft could garner broad political support, the radical left remained suspicious that ‘those who have the most money will be the first to access the places with the largest and cheapest supply of care’.[7] It therefore remains to be seen whether fears of an emerging ‘medical tourism’ will become a reality. While cross-border healthcare only stands for approximately 1 % of expenditure in the EU today, the scarce information we have on travel patterns and recent trends seems to indicate a movement from Western to Central and Eastern Europe, as well as a rapid increase in the number of individuals seeking healthcare abroad (Smith et al. 2012). In conclusion, the post-Services Directive debates show the continuation of sectoral liberalization with a relatively sustained level of public debate and contention which nevertheless only marginally affects the overall direction of the marketization agenda.

  • [1] ‘ Ministers discuss 4th railway package’, The Parliament., 10 October, 2014, available at, date accessed 10 June 2015.
  • [2] ‘Les raccourcis de la CGT sur la greve des cheminots suedois’, Le Monde, 16 June 2014,, date accessed 10 June 2015.
  • [3] ‘Swedes want state railway and rent market’ (Svenskarna vill ha statlig jarnvag och marknadshy-ror), DNDebatt, 07.06.2014,, date accessed 10 June 2015.
  • [4] See cases Decker, C-158/96; Smits et Peerbooms, C-157/99; Muller-Faure, C-385/99; Watts,C-372/04.
  • [5] Directive of the European Parliament and of the Council on the application of patients’ rights incross-border healthcare, COM(2008)4l4, 2 July 2008.
  • [6] Minutes of plenary session of the European Parliament, Strasbourg, 23 April 2009. See speechesby Bernadette Vergnaud, MEP, draftsman of the report for the committee on internal market andconsumer protection; Dagmar Roth-Behrendt, speaker on behalf of the PES; Claude Turmes,speaker on behalf of the Green/ALE; Kartika Tamara Liotard, speaker on behalf of GUE/NGL.
  • [7] Minutes of plenary session of the European Parliament, Strasbourg, 23 April 2009, speech byKartika Tamara Liotard, speaker on behalf of GUE/NGL.
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