Charlie McCreevy has kept a low profile in the EU, but he will have to act on a plan to liberalise the market, writes Denis Staunton in Brussels

Since his move to Brussels three months ago, Mr Charlie McCreevy has cut an uncharacteristically emollient figure, avoiding conflict and emphasising consensus as he settles into his role as Internal Market Commissioner. This could change in the coming weeks, however, as MEPs start debating the Services Directive, a far-reaching plan to liberalise the European market in services.

Sometimes known as the Bolkestein Directive, after Mr McCreevy's predecessor, Mr Frits Bolkestein, the directive aims to give service providers the same access to the EU's single market as manufacturers enjoy today.

One of the most controversial measures currently under discussion in the EU, it is likely to define Mr McCreevy's five-year term in the Commission.

France and Germany have described the directive as unacceptable in its present form and the European Parliament is expected to propose far-reaching amendments when it debates the proposal.

Services covered by the directive include accountancy, legal services, construction, and some aspects of healthcare. Transport, financial services and national education are explicitly excluded from its scope.

Mr McCreevy has signalled his willingness to amend the directive to take account of fears that it could lead to "social dumping" and job losses in some of the EU's richer member-states.

He has yet to outline his own vision for the liberalisation of services, however, and some MEPs, including British Labour's Ms Arlene McCarthy, believe it is time he spoke out.

"Everyone knows what's in the Bolkestein Directive. When are we going to see what's in the McCreevy Directive?" she said.

Mr McCreevy says he wants to hear the concerns of MEPs and national governments before proposing any changes, and Commission sources suggest that he is unlikely to present a revised proposal before the European Parliament debates the measure, probably in May or June.

Among the most sensitive elements in the proposal is the "country of origin" principle, under which service providers could operate throughout the EU under the rules in force in their home country.

Trade unions have warned that the principle could encourage service providers to base themselves in countries with the lowest levels of worker protection.

Many Socialist MEPs want the country of origin to be dropped altogether and replaced by a system where controls are located in the country where the service is provided.

Ms McCarthy believes that clarification is needed to ensure that the country of origin principle does not damage the interests of workers and consumers.

"It's nonsense to have a situation where a British hairdresser running a mobile hairdressing service in Germany cuts off the ear of a German customer and tells him or her to go to court under British law," she said.

One option that is gaining support in Germany is for Mr McCreevy to exempt certain sectors, possibly including healthcare and construction, from the country of origin principle. Another is to define the principle so narrowly that service providers would operate in practice under the rules that apply in their host country.

A further area of confusion is the scope of the directive, from which state-run health and education systems are to be excluded as "non-economic services of general interest".

Some areas of healthcare, such as nursing, could be covered by the directive, however, and EU countries have differing definitions of "services of general interest".

A strong political argument in favour of Mr McCreevy's cautious approach until now lies in the timetable for referendums on the EU Constitution.

France, where the Services Directive is deeply unpopular, is due to hold its referendum before July and pro-constitution campaigners fear that a noisy debate on market liberalisation could damage their chances.

Some economic liberals fear that if Mr McCreevy waits for the European Parliament debate before presenting his own, revised version of the directive, he will lose the initiative and strengthen the hand of the proposal's critics.

In a speech in Stockholm this week, the Trade Commissioner, Mr Peter Mandelson, expressed support for Mr McCreevy's approach but encouraged him to hold firm to the essence of the directive.

"We must, of course, safeguard genuine concerns about public services and employee rights. And I am confident Charlie McCreevy will bring forward proposals to do this. But let us not retreat in face of illegitimate pressures," he said.

Speaking to reporters later, Mr Mandelson warned against "throwing the baby out with the bath water".

He said that "vested interests" were leading opposition to allowing service providers operate throughout the EU under the rules in force in their country of origin.

"They oppose the 'country of origin' principle because they want to retain the right to lobby for protectionist rules on a national basis, so that they can continue to charge high prices to consumers and lead a cosy life. No one, including some colleagues on the left, should be seduced by this subtle propaganda," he said.

A number of European Parliament committees will report on the directive next month, giving Mr McCreevy a useful overview of MEPs' views.

He could withdraw the current directive and present his own version before the entire Parliament debates it in May or June, but insiders suggest he is more likely to wait until MEPs vote on their own amendments to it.

After the Parliament's vote, known as a first reading, the directive will go before EU governments before returning to the Parliament for a second reading. Even if the process goes smoothly, the directive is unlikely to pass through all stages of the EU's complex legislative process before the middle of 2006.

During his first few months in the Commission, Mr McCreevy has shown an unexpected willingness to compromise and an acute sensitivity to what is politically possible in an ideologically diverse EU of 25 countries.

He will need both, along with his well-established firmness of purpose, if he is to win support for his flagship measure from governments and MEPs while ensuring that the directive achieves its aim of opening up the European market in services.