EU faces pressure to follow UK on postal services

European Union countries came under pressure yesterday to follow Britain’s example and open their postal services to full-scale competition by January 2009.

Charlie McCreevy, the Internal Market Commissioner, described his latest proposals as “a final, small step” in a process that began a decade ago for complete liberalisation of the Pounds 60 billion sector. However, he insisted that the requirement to deliver, for the same affordable price, letters to any part of the country and to have at least one mail delivery and collection five days a week would remain. Known as the universal service obligation, this is enshrined in EU legislation.

The move is strongly supported by Britain, which ended the Royal Mail’s 350- year-old monopoly this year, and by Germany, the Netherlands, Finland and Sweden.

They have all lifted restrictions on new postal operators and together represent 60 per cent of the total EU market.

Britain welcomed the initiative, stating that “a fully liberalised European Union postal services market is a benefit to consumers, businesses and industry organisations” and would boost the Continent’s overall competitiveness.

Yet the plans are opposed by a majority of EU members, led by France, Italy, Spain and Belgium. They argue that it will not be possible to cover the costs of their universal service obligations if they have to open up more profitable parts of their business to competitors. The Commission has responded by pointing to the use of state aids and compensation funds to cover any additional expenditure. The critics are also looking to delay the legislation.

Mr McCreevy acknowledged that his proposal faced opposition and insisted that he had tried to strike a balance “between those who want to go further and those who think we are going too far”. To back his case, he singled out the change in fortunes at Royal Mail. Whereas previously it had lost more days than any other industry through strikes, that was no longer the case, losses had been turned into profits and dividends had been paid to employees, he said.

Under EU legislation ten years ago, governments agreed to introduce competition in postal services for items weighing more than 350 grammes. Five years later this was extended to all items over 100 grammes. The latest proposal would end the monopoly that national operators in most EU countries enjoy for the final protected sector: letters weighing less than 50 grammes.

The Commission predicts that business customers, which account for more than 85 per of all letters, will benefit most from the liberalisation. The proposals must be agreed by EU governments and the European Parliament.