Romano Prodi
President of the European Commission
Services of general economic interest and the European model of development
CEEP dinner
Brussels, 5 February 2003

Ladies and gentlemen,
It is a pleasure to be here with you this evening. My thanks to your President João Cravinho for his invitation and for the opportunity to talk to you.
The CEEP is an important partner for the Community. You represent enterprises with public participation and those of general economic interest before the European Institutions. You are consulted by the Commission on its draft proposals for directives on social matters. And you produce opinions on other issues involving Community policies.
As a social partner, you play a leading role in the European social dialogue. You represent the views of a significant section of operators across Europe and you speak for them on practically all aspects of the economy.
Your members' impact on the economy is considerable too. Enterprises of general economic interest or with public participation employ about 6 million people in the European Union. And they account for 9% of our non-agricultural economy.
So your vision of Europe is both broad and multi-faceted. As former chairman of Italy's largest State holding company IRI, I know the issues from the inside. They are complex and challenging. And they have reached a crucial phase. Which is why I value the chance to talk to you.
After the Single Market and the euro
I said we are at a crucial phase. Because our European integration process has now thrown up questions we cannot ignore. Such as giving substance to European citizenship and articulating our European model of development. And of course it raises the vexed question of the relationship between the State and the market, and the Community's role in this.
Remember our Lisbon target: "to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion."
The three factors in the Lisbon Strategy -- economic prosperity, social cohesion and environmental protection -- and the synergies they generate in combination give our development model its driving force and its originality. Particularly viewed from the long-term perspective of sustainability.
European integration was achieved by taking small steps forward in the economic realm. And some big steps too, such as the euro.
These steps have taken us a good way along the path of economic integration. At the same time they have brought us closer -- as citizens of Europe and in terms of the way we approach services of general economic interest.
Dismantling barriers and creating Europe-wide markets was essential to preparing the ground for a real Single Market.
In the 1980s, market integration began to extend to some services of general interest. The Community progressively developed a more positive approach to integration to meet the new needs that had emerged in Europe. It introduced a policy of "controlled" liberalisation of the big network industries -- such as telecommunications, postal services, transport and energy.
Community cross-sector policies -- on competition and State aid -- have started to have more impact.
At the same time, the role of the State was evolving, partly as a result of liberalisation.
It has always been the State's core responsibility to see that basic collective needs are met and common assets are preserved.
But the way the State fulfils its obligations towards the citizens has changed.
In the past, the State itself often provided services of general interest. This frequently involved monopolies.
Today the State often leaves this task to public or private enterprises. It concentrates on more conventional tasks of the State -- such as laying down policy objectives. It regulates and monitors such services and it ensures they are financially viable.
So in many cases the State's role is no longer to provide general interest services but to regulate and supervise them.
This has made their organisation and financing more transparent. And I think our citizens have gained with greater public debate and stronger democratic control of the ways such services are provided and financed.
The Treaty has changed too. Originally there were two articles on the subject, reflecting two principles.
The first (Article 86) ensures services of general economic interest can continue to be provided and developed in the Single Market. Providers are exempted from the rules governing the internal market and competition to the extent necessary for them to fulfil their mission in the general interest.
This is the principle of proportionality.
In practice, where a conflict arises, complying with a general interest mission defined at local, national or Community level can take precedence over the application of Community rules.
The other is the principle of neutrality (Article 295). The Community is neutral as to the public or private ownership of providers of services in the general interest. It cannot demand their privatisation and it has never done so. And the same rules apply regardless of whether they are publicly or privately owned.
The Single Market increased the need for further positive action by the Community to broaden and deepen the integration process and to ensure that the poorest regions and weakest citizens are not left behind.
For example, the Maastricht Treaty made provision for complementary policies and concepts -- such as European citizenship, consumer protection and economic and social cohesion.
Another step forward came with the Amsterdam Treaty. Article 16 specifically mentions services of general economic interest. It spells out their role clearly "in the shared values of the Union" and "in promoting social and territorial cohesion".
It does not give extra powers to the Community. But it requires the Community and the Member States to make sure their policies allow such services to fulfil their missions.
Above all, it is based on a new and more positive approach to this question. Article 16 appears among the general provisions of the Treaty. Services of general interest become one of the main principles of our action and an integral part of the European model.
The Charter of Fundamental Rights explicitly recognises the citizenship dimension of services of general interest. It makes access to such services a fundamental right.
A window of opportunity -- the Convention
So the Community and the Member States have greater responsibility for ensuring that services of general interest meet all citizens' needs as well as possible.
And against that background, the Commission wants a broad debate on how to achieve this and on the future of such services in Europe.
This is the purpose of the Green Paper the Commission intends publishing at the end of next month.
Our policy objectives are clear and meet with broad agreement. We need widely available services of general interest that function well across the Union in order to:
· make EU industry more competitive,
· strengthen social and territorial cohesion and solidarity,
· improve the way the Single Market functions,
· help integrate the new Member States into the Union,
· meet the heightened expectations of users and consumers,
· improve the quality of life of all citizens, wherever they live and whatever their social situation,
· allow our fellow citizens to utilise their fundamental rights to the full.
As I said, there is broad consensus on these objectives. But we need to see how to meet them.
The Commission has no intention of calling into question the Single Market as regards services of general interest. Achieving the Single Market and liberalising network industries has been fundamental to our strategy to improve the efficiency and the quality of a number of services of general interest. It has also contributed to European integration.
The results have been impressive. The Single Market will continue to be the basis for our policy on such services. A policy that will take on new importance with enlargement.
Efficient public services infrastructure will be vital in helping to integrate the new Member States after enlargement. Their citizens also need reassuring that their access to basic services will be maintained.
But we also need to answer a number of questions, such as:
· Do we need to consolidate existing principles within a framework directive?
· Apart from such consolidation, what would be the added value of such a directive?
· What would its scope and legal basis be?
· How are services of general interest to be financed?
There are various ways of financing services of general interest. One is to allocate the operator a reserved area. Another involves setting up sectoral funds. Yet another is to grant operators direct financial support from the State budget.
Various solutions have been applied in different sectors. We need to look at them and establish clear principles.
Many such services need extra support so the provider can stay afloat financially. It is generally agreed that Member States can legitimately grant financial support to offset the extra cost of public-service obligations imposed on operators.
But the public authorities and the operators need to be clear how this principle applies. We must ensure that the Single Market is not distorted through the wrong financing mechanisms or overcompensation.
· How must general interest services be regulated?
Here we need to consider a number of issues:
Sustainability: Our policies need to accommodate our long-term goals in terms of environmental protection, mobility, education and social inclusion. Public services must be a core element of our sustainable development strategy.
Rights of citizens and users: Properly functioning public services are essential for European citizenship. We may need to strengthen citizens' and users' rights at European level in this area.
Subsidiarity: This is a key issue. Regulating these services is essentially a matter for national, regional and local authorities. There is great diversity between the Member States and this needs to be respected.
Where such services are regulated at Community level, we need to ask:
· Is it enough to lay down minimum rights and standards at Community level?
· Do we need full harmonisation in some areas?
· How can we improve cooperation between the regulatory authorities at various levels?
· Do we need an EU regulator for some services?
· Another important question: What is the impact of global trade in services?
Negotiations on trade in services within the World Trade Organisation can impact on the way services of general interest are organised and provided within the European Union. We need to bear this in mind.
At all events the Commission is committed to making sure the Union and the Member States can continue to ensure Europe has a strong, high-quality public-services infrastructure and to be able to develop it.
Amending the Treaty
Ladies and gentlemen,
We need a strategy to ensure high-quality services of general interest that combines an ambitious EU policy and respect for cultural diversity and subsidiarity.
We can devise such a strategy with the Treaties as they stand. But we have a window of opportunity to amend the Treaty. The European Convention discussing the future of Europe has started looking at services of general interest.
The Commission has already suggested adding services of general interest to the activities of the Community listed in Article 3. This would make properly functioning services of general economic interest a Community objective.
Article 16 could also be redrafted along the lines suggested by the Convention's Working Group on Social Europe.
The Commission has not yet formally defined its position. Any Treaty amendment should be considered carefully and assessed in the light of a long-term strategy.
Ladies and gentlemen,
The debate is now open on these issues. They go to the heart of many questions that need answering urgently -- in the European Union of today and even more in tomorrow's.
These issues concern the relationship between the State and the market, the process of European integration and the concept of European citizenship. So they concern us all as citizens and consumers. And they concern you in particular as service providers.
At the end of next year we will grow into a Union of 25 Member States. We have reached a turning point in our development. So your contribution to the debate is crucial.
We can stand still politically and become the largest regional subgrouping of the World Trade Organisation.
Or we can take a courageous step forward along the road to political integration and turn ourselves into a dynamic political player on the world scene.
Thank you.