Difficult Privatization

Investors are to be offered a minority stake in the Deutsche Bahn rail company, which operates not only trains but also trucks in several European nations.

Hans-Peter Friedrich, representing Chancellor Angela Merkel's own Christian Democrats, said after inter-party talks that the government would remain owner of the 34,000 kilometers of track and the stations, but Deutsche Bahn would obtain contractual rights of use.

German Transportation Minister Wolfgang Tiefensee, who is a Social Democrat, said the parties struck a deal where the government would not take over any of Bahn's debt and existing job guarantees for Bahn staff would remain in place.

A privatization bill would be drafted by the end of next March.

Another Social Democrat, Ludwig Stiegler, said the size of the first share tranche would depend on the value of Deutsche Bahn at the time of the offering. Earlier, sources had suggested up to one quarter of the government-owned company would be offered for sale.

Political infighting

German Chancellor Angela Merkel affirmed on Tuesday plans to privatize the country's rail system despite political infighting about whether to sell the system's land and tracks too.

"We stand by our intention to list Deutsche Bahn on the stock exchange," Merkel said, speaking to German business leaders.

Assets of the group include its international freight operations using both trucks and trains, inter-city express (ICE) bullet trains serving major German cities and metro rail networks. Earlier this year the company opened the jewel among its stations, a glistening glass-and-steel interchange in the heart of Berlin.

Compromise reached

Last week the federally owned rail company's CEO, Hartmut Mehdorn, admitted to having doubts on whether the flotation, which he had enthusiastically promoted, would go through.

Last week, Mehdorn warned the company might need to find other sources of capital for huge projects, but added that he would stay at his post whatever happened.

"I'm not a guy who gives up," Mehdorn said.

The retention of state rights to the track was a key demand of the Christian Democrats, whereas the Social Democrats (SPD) opposed any British-style separation of the railtrack and the rolling-stock businesses. The compromise is expected to satisfy both parties.

An expensive investment

Efforts aimed at privatizing the federal railway began in 1994 and since then a staggering 213 billion euros ($271 billion dollars) of state money has flowed into the railways.

The results have been sobering with just 12.4 per cent more people using the train to travel in the period from 1994 to 2005. The number of people taking the train for longer trips actually fell by 3.5 per cent during this period. Last year the amount of freight carried by the German railway declined by 1 per cent compared with 2004.

"The 213 billion euro disaster" was how the German daily Die Welt headlined its Wednesday story on Germany's railway privatization bid.