Germany to sell railways

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Andrew Feinberg

White House Correspondent

BONN (Reuter) - The German government said yesterday it intended to privatise its railway system, converting its two debt-ridden national railway networks into three public companies by 2002.

On the day after Britain announced its own railway privatisation proposals, Guenther Krause, Transport Minister, said the ambitious restructuring plan would be financed largely through private investment and the introduction of highway tolls for lorries. The government agreed to relieve both the western German Bundesbahn and the eastern German Reichsbahn railways of their debt, totalling DM55bn ( pounds 19.3bn), in 1994.

Privatisation will begin in 1994, when the Deutsche Bundesbahn and the Reichsbahn will be merged to form the Deutsche Eisenbahn AG (DEAG). Under the reform plan, the DEAG would set up three subsidiaries in charge of passenger travel, freight transport and track maintenance.

By 2002, the DEAG holding company would disappear and the three units would operate as independent public companies.

Mr Krause said he would present draft legislation in the autumn for a change in the constitution needed to privatise the railways. If approved in both houses of parliament, the law could take effect by mid-1993.

Industry analysts forecast a long haul for the debt-burdened railways, but approved of the government's reform plan.

'There has been talk about privatising for 20 years but this is a reasonable plan and it goes the right way,' said Ralf Rantzenberger, of Munich's Ifo research institute. 'The important thing is that rail moves away from its bureaucratic structure.'

Mr Rantzenberger said railway operating losses would not be eliminated overnight by the transformation into a joint-stock company, but they could be cut sharply.

For the first time, the government will spend more on railway development than on motorways.