France's Macron sets sights on EU cheap labour rule

SALZBURG (AUSTRIA) – 23 August 2017: The EU is a "real step" closer to overhauling a controversial rule on detached workers, after talks with leaders from eastern and central Europe, French President Emmanuel Macron said Wednesday.

The so-called Posted Workers Directive allows firms to send temporary workers from low-wage countries to other member states without paying local social charges.

The regulation has come under fire from rich nations like France whose president has described it as a "betrayal of the European spirit".

Macron embarked Wednesday on a three-day diplomatic blitz through Austria, Romania and Bulgaria to drum up support for his ambitious plan to reform the directive at a summit in October.

So far he has faced staunch resistance from eastern and central European countries, but there were signs of a breakthrough after discussions with the leaders of Austria, Slovakia and the Czech Republic in Salzburg.

"We've firmly expressed our will to find a real compromise in October," Macron said on Wednesday evening at a joint press conference.

"Our talks mark a real step forward... and I'm glad about that."

Although the issue affects less than one percent of the EU's workforce, experts say the trend is on the rise.

The directive was launched in 1996 to help stimulate cross-border business, at a time when EU members broadly shared similar living standards.

But critics argue that the bloc's eastward expansion in 2004 has opened the system to abuse.

Firms in former Communist countries pay much lower salaries, giving them a huge competitive edge when bidding for work abroad. In addition, they don't have to pay into the host nation's social system.

- 'Stokes populism' -

Austria and France are among the bloc's key recipients of temporary employees.

Backed by Vienna and Berlin, Paris now wants the duration of these job postings to be limited to 12 months, half the period proposed by the European Commission.

"The single market and the free movement of people weren't created to help countries promoting the lowest social rights. This is what stokes populism in our countries," Macron had said ahead of Wednesday's talks.

Slovakian Prime Minister Robert Fico acknowledged that finding a solution would be "good news for the EU", but said any such pact should have support from Budapest and Warsaw, two fervent opponents of Macron's reform.

The hard-right leaders of Hungary and Poland were notably absent from Macron's meeting schedule, which will take him to Romania on Thursday and Bulgaria on Friday.

Budapest and Warsaw have repeatedly clashed with Paris over the proposed reform.

Poland is the country that benefits most from the Posted Workers Directive.

An estimated 500,000 of its nationals are employed by Polish companies in other EU members.

Top officials in Brussels however welcomed French efforts on Wednesday

The European Commission and its president, Jean-Claude Juncker, "have made the fight against social dumping one of their key priorities", said Alexander Winterstein, a spokesman for the EU's executive body.

- Under pressure at home -

Macron hopes to reach an agreement at a Brussels summit on the EU directive on October 19-20.

Ahead of that meeting, he will host leaders from Germany, Spain, Italy and the Netherlands later this month.

Franco-German unity is seen as a pre-requisite for an overhaul of the rule.

Pierre Vimont, a senior fellow at the Carnegie Europe think tank, called changing the directive "a symbolic case" for Macron, whose popularity ratings have plummeted since he took office in May.

It is part of his broader election campaign promise to create a new "protective Europe" that helps shield citizens from the effects of cut-throat international competition.

The 39-year-old centrist is also pushing for a new mechanism to screen non-EU investments, particularly from China, into strategic areas of the European economy, as well as tougher measures to block the dumping of cheap imports on the continent.

He also wants much deeper integration of the eurozone, including giving the 19-country currency bloc its own budget, finance minister, parliament and borrowing capacity.