This record is a partial extract of the original cable. The full text of the original cable is not available.

100605Z Feb 06

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