FT.com / Companies / Europe - Berlin takes slow train

FT.com / Companies / Europe - Berlin takes slow train

Berlin takes slow train
By Paul Betts

Published: September 26 2007 03:00 | Last updated: September 26 2007 03:00

Deutsche Bahn set off towards privatisation a decade or so ago. It has been a long and tiring journey. But this summer it looked as if the German railway was reaching its destination when the cabinet approved the bill to sell off up to 49 per cent of the state company.

Yet like autumn leaves on the lines, politicians from left and right are creating obstructions that risk derailing the process.

Parliament has started debating the bill partially to privatise the train operator and giving it the right to operate the rail network, but the final vote will only take place next year.

Some socialist members of Angela Merkel's grand coalition are raising objections to the partial sale to institutional investors. They are suggesting that if the sale does take place it should be directed entirely to small German shareholders. They would be granted non-voting shares paying a hefty coupon. This would keep the railway firmly in state hands.

Some members of Ms Merkel's rightwing CDU party are rallying behind their leftwing coalition partners, for reasons of their own. They are not so much opposed to the partial sale, but do not like the idea of privatising the train operator as well as the rail network. The problem is that splitting the operator and the network, which would remain wholly state-owned, would make any sale difficult, given that what attracts international funds and infrastructure companies is the idea of investing in an integrated railway group.

A number of regions have joined the debate, making it clear they do not like the sell-off and will do all they can to block it.

Ms Merkel has so far remained on the fence. But she can hardly keep quiet over such an important policy decision designed to show Germany's free-market credentials. Allowing the politicians, after all these years, to sabotage this partial privatisation would send an uncomfortable signal to the international investment community and Germany's European partners.

It would make other future privatisations - the government's remaining 32 per cent in Deutsche Telekom, its 30 per cent stake in the post office, airports, eventually even motorways - more complicated. Worse, it would highlight the country's continued protectionist instincts and doubtless undermine Ms Merkel's own position.

Copyright The Financial Times Limited 2007