The European parliament has finally passed its amended version of the controversial services directive while thousands protested at its gates. British prime minister Tony Blair and European Commission president José Manuel Barroso, the greens and conservatives in the parliament, trade unions and business associations had all started the year by declaring that the liberalisation of services markets would be the key European issue in 2006.

Kalypso Nicolaïdis is lecturer in international relations at the University of Oxford. Her homepage is here

Also by Kalypso Nicolaïdis in openDemocracy:

"'We the peoples of Europe '"
(December 2003):

"The EU is a wonderful machine for managing differences through creative negotiations. A positive-sum game is not one where some win and others lose; it is about finding solutions that benefit all its member countries and makes no one worse off."

In the event, the version churned out by the European parliament frustrates the hopes of Europe's liberals as it waters down or removes the most liberalising provisions – including the "country of origin" principle that would have allowed companies to apply their own countries' domestic laws when providing services in other European states. Yet they should consider it a necessary compromise, compatible with their own philosophy.

Perhaps there is something to be learned by contrasting this debate with the other great controversy of the day – the publication and circulation in Europe of cartoons depicting the Muslim prophet, Mohammed.

In both cases, passionate advocates see grand principles pitted against one another. Freedom of movement against respect for sacred social laws; freedom of speech against respect for sacred symbols; socialism vs neo-liberalism; the west vs the rest.

And yet in neither case can we accept the framing of the issue in such stark terms. The real opposition is between self-righteousness on all sides and the difficult search for justice in a globalised world groping for ways to manage our increasingly conspicuous – if not actually greater – cultural and economic differences.

At the heart of both controversies lies the same paradox. If those of us who live in prosperous western Europe (and in other areas of the privileged global north) want people from elsewhere to better integrate in our economies and our societies we need to recognise the validity of at least some of their habits and rules from home. Only in the name of an old-fashioned defence of sovereignty and the absolute match between territorial, legal and administrative jurisdiction can we reject the multifaceted demand for recognition.

If people in the original heartland of the European Union want the countries of east-central Europe which joined the EU in 2004 to catch up, they cannot ask their small businesses and citizens to adapt all over again to each member-state's rules – and this is in a European space which is supposed to be borderless. Similarly, we cannot simply ignore the civic responsibilities (in Tariq Ramadan's words) that come with Europe's claim to primacy in the so-called dialogue of civilisation with the Muslim world within and beyond our borders. Most Muslims cannot be expected to buy our hard-earned fondness of blasphemy wholesale, here and now. Recognition, be it of regulations or identities, means internalising the interests and beliefs of others.

Also in openDemocracy on the "cartoon war" in Europe and the Muslim world:

Neal Ascherson, "A carnival of stupidity" (February 2006)

"Muslims and Europe: a cartoon confrontation" (February 2006) – a compendium of views from twenty writers

Doug Ireland, "The right to caricature God and his prophets"
(February 2006)

Tariq Modood, "The liberal dilemma: integration or vilification? "
(February 2006)

Ehsan Masood, "A post-Satanic journey" (February 2006)

Sarah Lindon, "Words on images: the cartoon controversy"
(February 2006)

Fred Halliday, "Blasphemy and power" (February 2006)

S Sayyid, "Old Europe, New World"
(February 2006)

Saskia Sassen, "Free speech in the frontier-zone"
(February 2006)

Daphna Vardi, "Jews and cartoons: why the connection? "
(February 2006)

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A community of others

But we must not forget two crucial corollaries to the demand for recognition: that in order to be sustainable, recognition must be mutual and it must be managed over time.

Managed mutual recognition implies that acceptance of other people's norms can and must be reciprocal, conditional, progressive, partial, negotiated, dynamic and predicated on critical safeguards, including basic compatibility between the customs and laws of the countries or communities involved. As the Hegelian philosopher Alexandre Kojève pointed out, recognition is predicated on mutual trust as well as the consensual bargaining over the limits of such trust at any given point.

Indeed, the European single market has been predicated on this subtle approach for the last twenty years, both for goods and services, including through the recognition of diplomas. So is the compromise adopted by the European parliament. The amended text reaffirms that the basic social laws of the host country will apply to workers and excludes from application "services of general economic interest" (like transport, energy and postal services).

At the same time, the text contains a built-in dynamic for the expansion of recognition over time. It enables governments to enforce local rules pursuing social, environmental, health, security, and consumer-protection objectives, but only to the extent that these are "necessary" and "proportional" to the goals pursued. In other words, if countries of origin do their job, they will see their laws recognised to the extent that the European Court of Justice, the commission and other associated interests remain keen to enforce non-discrimination to the fullest. The sphere of mutual recognition will expand in tandem with the requisite level of convergence and tolerance between social systems.

Which brings us back to the cartoon clash. For Europeans to be truly reconciled with recognising the sensitivities of Muslims (European or not, inside or outside Europe), mutuality will certainly help. Muslim societies do not have to become like European societies – although more freedom of speech in many of them would be welcome – but they must understand that many of us hold sacred the right to express disrespect for religion.

Moderates ought to argue on the fine points – such as whether limits to free speech are legal or moral questions or whether bans should be considered in cases of disrespect or only where incitement to violence is involved. But surely, the hope is that – with time, greater convergence, mutual knowledge and indeed healthy non-violent conflict – the scope for mutual recognition will expand here too.

This is the European vision, if there is one: living with our differences and seeking to harmonise if and only if such differences are illegitimate.

Recognition is a tough call on all sides of the political spectrum. The left fears social dumping when recognition means importing market rules; libertarians fear political dumping when recognition means importing curbs on free speech. Even if these fears can be exploited to demonise Polish plumbers or Muslim migrants, they must be assuaged. Ultimately, however, they must also be transcended if we are to live in Europe and in the world as a community of others.