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