Tony Blair launched a fierce counter-attack against Jacques Chirac yesterday, accusing him of running an out-of-date economy that delivers low growth and high unemployment. In a statement to the Commons on this week's fractious EU summit in Brussels, the Prime Minister said struggling EU economies such as France's should imitate Britain which had successfully combined flexible labour markets with generous worker protection. The Prime Minister's remarks were aimed directly at the French president who accepted his help in a summit row over economic reform only to march into a press conference hours later to demand the end of Britain's £3 billion EU rebate. In a further sign of Mr Blair's anger, the Prime Minister insisted that the British backed the "services directive", which aims to liberalise the services market across Europe, and said it would still be voted through by EU countries - despite Mr Chirac's claims that he had forced a complete rethink.Mr Blair told MPs there was an open argument between countries that wanted to modernise the out-of-date European "social model" of lavish welfare benefits and subsidies, such as Britain, and others such as France that wanted to cling to it. "Some, notably France, believe this model should remain in its existing form," said Mr Blair. "Some, like Britain, believe firmly in Europe's social dimension but want it updated to take account of modern economic reality." Britain had the benefit of "empirical evidence" that its approach was the right one, in the form of higher growth and lower unemployment.
Mr Chirac secured agreement in Brussels that the services directive, which is deeply unpopular in France where it is seen as a symbol of rampant Anglo-Saxon liberalism, would be rewritten. EU leaders decided to give ground to Mr Chirac because of fears that the issue could boost the No campaign with less than two months to go before France's referendum on the EU constitution. But yesterday Mr Blair disputed the French claim that the directive, in its original form, was effectively dead following the summit. He said he still believed it would be voted through by the 25 EU nations, the majority of which still backed its main thrust. EU diplomats in Brussels also disputed Mr Chirac's claims. One said: "What Chirac claims he got out of the summit is not consistent with what was agreed, or what was published in the final conclusions. But I think all EU leaders understand his needs. He had to come away from the European Council assuring the French people he is still the big man of Europe." Mr Chirac currently has support from Germany, Sweden, Denmark and probably Spain, a formidable voting bloc.
The most controversial part of the directive is the so-called "country of origin principle". This permits service providers from one EU nation - a British IT consultant or a Polish house painter - to take short term contracts in other EU nations without having to go through the bureaucracy of applying for local qualifications, such as membership of a German house painters' guild. They would have to accept local regulations if they wanted to stay for a longer period.