COMMISSION ARGUES FOR LIFTING CURBS ON

UNCLAS SECTION 01 OF 02 BRUSSELS 000456

SIPDIS

DOL FOR BLS AND ILAB
STATE FOR DRL/IL

E.O. 12958: N/A
TAGS: ELAB ECON EUN USEU BRUSSELS
SUBJECT: COMMISSION ARGUES FOR LIFTING CURBS ON
LABOR IN ENLARGED EU



1. SUMMARY. The EU Commission released its
analysis of the impact of workers from Central and
Eastern European countries on the labor markets of
the "old" member states. The report listed
arguments against restrictions to the free movement
of workers imposed in 2004 by most of the "old" EU
members, including statistics showing lower than
expected labor flows from Central and Eastern
Europe. The Commission concluded that post-
enlargement migration flows had "positive" effects
on the economies of the former EU-15. The analysis
is designed to provide the "old" member states with
a factual basis when deciding (by the end of April
2006) on whether to extend national restrictions on
workers' movement. While fully acknowledging member
states' right to do so, Employment and Social
Affairs Commissioner Spidla left no doubt he would
like to see the restrictions lifted. However, his
message is unlikely to be heard in Germany, France,
and Italy as well as in current Presidency Austria.
The Commission's report is available from
http://europa.eu.int/comm/employment_social/e mplweb/
news. END SUMMARY.


2. The Commission on February 8 released its report
on the functioning of the transitional arrangements
limiting the free movement of workers within the
enlarged EU. In accordance with the terms governing
the accession of the "ten," twelve countries of the
former EU-15 (all except Sweden, Ireland, and the
UK) imposed national measures restricting the free
movement of labor from the eight new Eastern and
Central European countries that joined on May 1,

2004. Those twelve countries maintain a work permit
or quota system, although the Commission recorded
many differences among national regimes, some
applying more flexible arrangements for specific
sectors and occupations. The restrictions, set for
an initial two-year period, are to be reviewed
before member states decide on whether to apply them
for a further three years from May 2006. A further
extension might be granted in 2009 for a final two-
year period, subject to convincing evidence of labor
market disruptions.


3. The Commission's report, presented by Employment
and Social Affairs Commissioner Spidla at a press
conference, was drafted pursuant to the transitional
arrangements. It is designed to provide member
states with a factual basis when deciding on their
regime for the second stage of the accession
arrangements. Austria and Germany, which border
several of the new member states, already served
notice their restrictions will be maintained.
Finland and Spain, on the other hand, would be
prepared to lift them. To our knowledge, the other
countries concerned (France, Belgium, Luxembourg and
the Netherlands, in particular) have failed to take
a clear public stance.


4. The report's statistics, submitted by the EU
member states themselves, show most countries having
seen lower than expected labor flows from Central
and Eastern Europe. In Spidla's words, "the fear"
of a massive influx of workers that motivated the
introduction of the transitional arrangements has
proven to be "very often disproportionate" and is
"not reflected in the reality." The report shows
"no evidence"(.) of a "direct link between the
magnitude of mobility flows" from the "Ten" and the
transitional arrangements in place. "In particular,
flows into the UK and Sweden, which are member
states without restrictions for EU-8 workers, are
comparable if not lower to those into countries with
transitional arrangements."


5. According to the report, the Commission detected
"no evidence of a surge in either numbers of workers
or welfare expenditure following enlargement,
compared to the previous two years." Noting that
immigration from non-EU countries is "a much more
important phenomenon than intra-EU mobility," the
Commission found new member state (EU-10) nationals
representing less than 1.0 percent of the working
age population in the former EU-15, except in
Austria (1,4 percent in 2005) and Ireland (3,8
percent in 2005). Ireland has seen relatively the
largest inflow of workers but the Commission argues,
"This contributed to its very good economic
performance." Within the three countries that
agreed to take on new workers without restrictions
to their market, the UK registered around 200,000
job seekers, Ireland over 150,000, while Sweden
issued 3,500 residence permits in 2004. Germany
issued around 500,000 work permits to EU newcomers
between 2004 and 2005 (0.9 percent of the country's
working age population),Austria 70,000 (1.2
percent),Italy about 50,000 (0.1 percent),the
Netherlands over 20,000 (0.2 percent),and other
"old" member states below or slightly over 10,000.


6. Workers from the EU-10 were said to have
alleviated skills bottlenecks, and the proportion of
EU-10 nationals in the EU-15 with low-level
qualifications was lower than for nationals of those
countries. The Commission concluded that "EU-10
nationals positively contribute to the overall labor
market performance, to sustained economic growth and
to better public finances." The Commission also
argued that restrictions on labor market access
might fuel an increase in the black economy, as
workers come in illegally. "Ultimately," the
Commission said, "mobility flows are driven by
factors related to supply and demand conditions."
The Commission noted that labor market developments
in the new Central and Eastern European members have
been positive since enlargement with unemployment
rates showing significant decreases in most of these
countries. There was "no need to expect increased
pressure to move outside EU-8 countries, also as the
outlook for economic growth remains bright" and EU
structural funding is beginning to have an impact
"in promoting economic growth and employment
creation" in the new member states.


7. Though the report stopped short of issuing a
formal, specific recommendation to the countries
still imposing restrictions, the Commission's
message was unambiguous: "Free movement of workers
is economically rational and is enshrined in EU
treaties," Spidla said. "This report clearly shows
that the movement of free workers had no disruptive
effects. Quite the contrary, individual countries
and Europe as a whole benefited from it." Comparing
the former EU-15 to Janus, the Roman god with a
double-faced head looking in opposite directions,
Spidla left no doubt he had little sympathy for the
"short-sighted" states "looking into the past."
While fully acknowledging member states' right to
decide on the further use of transitional
arrangements, the Commissioner "recommends (that
they) carefully consider whether the continuation of
(those measures) is needed, in the light of their
labor market development and the evidence of this
report," the Commission said in a press release.


8. COMMENT. The Commission's report -- issued at
the beginning of "the European Year of Workers'
Mobility" -- confirms other analyses of migration
flows from the new member states showing that the
much-feared flood of workers has not materialized.
Yet, the issue remains controversial as shown by
internal Commission debates in which members from
Austria (Ferrero-Waldner) and Germany (Verheugen)
reportedly sought to water down the tone of the
report. Spidla will likely be accused of depicting
too rosy a picture of the situation. In spite of
the arguments outlined in the report, large
economies -- Germany, Italy and France, where the
so-called "Polish plumber" syndrome was invoked in
the 2005 referendum campaign -- look set to retain
their curbs. The "old" member states could, in
theory, relax conditions for targeted sectors or
vis--vis some of the new countries, but such
decisions would be difficult to explain and would be
perceived as the creation of a two-tier EU. To
which some critics will answer that the existing
restrictions already created a two-tier system.

MCKINLEY