The article analyses the difficulties in creating an internal market for services with special regard to the accession of the new Member States. Starting from the example of job losses in Germany that are blamed on the application of the freedom to provide services to the new Member States, the article goes on to describe the Commission’s proposal for a new directive on services in the internal market. The decision to withdraw the proposal in its original form is explained. Possible restrictions of the freedom are analysed with regard to the requirements which the ECJ has derived from the Treaty. On the basis of this case-law, fears of a ‘race to the bottom’ are analysed and regulatory options are assessed. It is concluded that the principle of mutual recognition has to be the basis of any solid attempt to create a functioning internal market also for services. Nevertheless, the fears existing in the old Member States – although at least partly unfounded – need to be taken seriously. Some form of harmonisation might be the price to be paid for making borders within the EU permeable to services.