Today’s challenges for the railways in Germany

100 years ago, railways in Germany had no serious competition. Their share of the freight transport market was 70%. Not until the 1930’s was there a change, brought about by the rise in road transport. Due to technological progress and by being more flexible and customer focused, road haulage was able to rapidly gain market shares.

The cumbersome and complex bureaucratic machinery of the railways was hardly able to reverse the progress, quite the contrary: The railways kept losing market shares and piling up debts. In order to bring these trends to a stop and preserve the railways as an economically and ecologically meaningful mode of transport, the German Bundestag adopted the reform of the railways in 1994.

With the Federal Government being responsible for the infrastructure and Deutsche Bahn AG (DB AG) being organised under private law, the reorganisation of the railway system paved the way for the decisive turn for the better. In the passenger services sector, passenger kilometres of all train operating companies (ToC) increased by approximately 25% between 1994 and 2008. In the freight sector, the volume of freight moved by all ToC’s increased by as much as 65%. But the trend had already slowed down in the fourth quarter of 2008. The crisis on the financial markets and the economic downturn have reached the transport sector.

In times of crisis, the government is particularly challenged to take the appropriate steps to guarantee growth and employment. The railways are a mainstay of Germany’s competitiveness in Europe. Efficient and reliable logistics is what makes us strong as a business location. And we have to retain this strength particularly in times of economic crisis.

The Federal Government’s general responsibility to maintain and upgrade the railway network is enshrined in the German Constitution. On 1 January, the Federal Ministry of Transport, Building and Urban Affairs and DB AG replaced the previously common individual and collective financing agreements by a service level and funding agreement for investment for maintenance of the existing federal railway network. The agreement regulates the provision of grants by the federal government for the railway infrastructure until 2013 and creates long-term planning certainty for DB AG. In return, DB AG undertakes to maintain the high quality of the railway network and continues to increase the attractiveness of railway stations. Passengers and rail freight are the beneficiaries.

The Federal Government has launched the biggest post-war economic stimulus programme. With around 4% of its economic power, Germany is now bracing itself against the global financial and economic crisis. The two packages of measures adopted by the Federal Government provide considerable additional funds for investment in the rail sector.

In addition to the €2.5 billion available each year for the replacement of capital assets on the existing network, as provided for in the service level and funding agreement, the Federal Government commits additional funds to construct new and upgrade existing federal railway infrastructure in order to meet requirements. As a special programme for the removal of bottlenecks in rail freight links to and from seaports, funds totalling €230 million will be available for investment in the financial years 2009 to 2011. €1.12 billion of the revenue from the heavy goods vehicle toll have been included in the 2009 Federal Budget for the railways.

As part of the ‘Construction and Transport Job Creation Programme’ (Economic Stimulus Programme I), additional funding will be made available for 2009 and 2010 – a total amount of €570 million to accelerate requirement plan projects and modernise passenger stations. In addition, this programme also involves increasing the funding for noise mitigation in the two years by a total of €50 million.

Investment in rail infrastructure is supported by the ‘Pact for employment and stability in Germany’ (Economic Stimulus Programme II). In 2009 and 2010, it will provide an additional €700 million for the railways. These funds are to be mainly used to support the railway station programme, the ongoing investment projects of the railway requirement plan, innovative track technologies and to accelerate the introduction of the European train control system ETCS.

The projects were selected based on how beneficial they are for the transport sector and how fast they can be realised, so that the programme can give a positive impetus to business and the transport sector as quickly as possible. The two economic stimulus programmes provide an additional €4 billion for the federal infrastructure in 2009 and 2010, with €1.32 billion being used for the railways. Railway services are only as good as the network on which they are provided. A higher quality rail infrastructure will thus enhance the railways’ competitiveness for the time after the crisis.

The Federal Government continues to pursue the objective of shifting more traffic to the railways. To this end, we want to continue on the path we have embarked upon, towards a liberalised European railway market and an integrated transport policy. If we want to successfully manage future traffic volumes, we need a reasonable division of responsibilities and an optimised connectivity of all modes of transport. Only then can we master the economic and environmental challenges of our time.