Health and public services should be excluded from a controversial bill to liberalise services within the European Union, the executive European Commission said today.
Responding to widespread criticism, EU Internal Market Commissioner Charlie McCreevy said he was also willing to clarify the "country of origin" principle to make clear that allowing firms to sell services throughout the 25-nation bloc would not lower standards or conditions for workers.
"I will not stand over a directive that allows social dumping," Mr McCreevy said, responding to objections raised in particular by France and Germany.
But he added: "It is not my intention to end up with a services directive that has so many exemptions that it is not worth the paper it is written on. . . . We need a directive that will remove the red tape that is holding business back."
The EU executive has insisted it will not simply withdraw the proposal, intended to shake up a sector that accounts for nearly 70 per cent of the European economy, boosting growth and creating jobs.
However Mr McCreevy said it had become clear to him that the original legislation proposed by his predecessor, Dutchman Frits Bolkestein, "simply was not going to fly".
Critics of the directive have opposed the "country of origin" principle whereby service providers from one EU state could work across the bloc based on home country regulations.
They argue this would lead to "social dumping", penalising firms and workers from those countries with higher standards of social and environmental protection.