Merkel coalition edges towards rail sell off deal

15th April 2008, Comments 0 comments

Germany's Social Democrats announces a compromise deal on selling off the nation's state-owned railways Deutsche Bahn AG, opening the way to an agreement on privatizing Europe's biggest rail company.

15th April 2008

Berlin - After an almost five-hour overnight meeting, the Social Democrats (SPD), the junior members of Chancellor Angela Merkel's grand coalition unveiled a plan allowing private investors to buy up to 24.9 per cent of Deutsche Bahn's passenger and logistics operations.

"What's important to us is that the economic, ecological and political preconditions for a successful railway are included together in a single (privatization) model," said SPD party chief Kurt Beck announcing the plan.

But while this fell short of the 49.9 per cent that Merkel and leading members of her conservative bloc having been arguing for, a key member of her party welcomed on Monday the privatization model agreed to by the SPD leadership.

The new SPD plan was "a sensible basis" for discussing the partial rail privatization said Christian Democrats' general secretary Ronald Pofalla.

At the same time, Deutsche Bahn chief Hartmut Medhorn signaled that he saw the SPD's sell off plan as a good basis to work on.

"Something is better than nothing," said Werner Schnappauf, the chief of the German Federation of Industry commenting on the SPD plan.

The new moves over the sell off of Deutsche Bahn, come ahead of a planned meeting later this month when Merkel's Christian Democrats- led bloc and the SPD are scheduled to hammer out details of the rail company's partial privatization.

Medhorn has said he hopes that his company, which is the last major German state-owned company facing privatization, will make its stock-market debut possibly as early as September.

Some analysts, however, believe that 2009 would be a more realistic target date for the privatization.

The build-up to this month's scheduled decision on the sale of shares in Deutsche Bahn came after the group announced that profit that last year rose 2.1 per cent to 1.72 billion euros (2.72 billion dollars).

Deutsche Bahn forecast a rise in sales of about 5 per cent in 2008 after saying 2007 sales jumped by 4.2 per cent to 31.3 billion euros.

After coming under fire from business and economists about her government's failure to press on with economic reform, Merkel needs the rail sell off to demonstrate her commitment to reforming Europe's biggest economy.

A spokesman for Merkel said the Chancellor was seeking an "economically sensible solution" to rail privatization.

The partial selling off of Deutsche Bahn would be the culmination of a 14-year battle to turn around the financial fortunes of the once loss-making rail operator.

But the rail privatization push has followed a rocky path with former Chancellor Gerhard Schroeder's government having failed in its plan announced in 2004 to sell off shares in the rail company between 2006 and 2008.

Deutsche Bahn's privatization was revived again the following year when it was included as part of the accord forming Merkel's Christian Democrat bloc-SPD government.

But the moves for the partial sell off of the Berlin-based rail group have triggered opposition among influential leftwing members of the SPD.

The SPD's leadership hope the compromise reached at their late- night marathon meeting Monday will placate critics within the party's ranks.

However, Beck ruled out a special party conference to consider the compromise sell-off model.

Under the plan thrashed out between Social Democrat leaders, 75.1 per cent of Deutsche Bahn's passenger and freight operations along with 100 per cent of the rail company's track network would remain in state hands.


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