# CE2004078EN.01003801.xml

| 27.3.2004 | EN | Official Journal of the European Union | CE 78/38 |
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27.3.2004

EN

Official Journal of the European Union

CE 78/38

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(2004/C 78 E/0038)

WRITTEN QUESTION E-1568/03

by Erik Meijer (GUE/NGL) to the Commission

(8 May 2003)

Subject:   Sharp cuts in passenger services on the Slovakian rail network as a result of secret conditions in a loan granted by the EIB in 1999

Subject:

| 1. | Is the Commission aware that the European Investment Bank (EIB) granted the Slovakian government a loan of EUR 120 million in 1999 and that it only later emerged that the loan was tied to conditions imposed unilaterally by the EIB requiring stringent cuts in passenger services through the closure of 32 lines in 2002? |
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1.

Is the Commission aware that the European Investment Bank (EIB) granted the Slovakian government a loan of EUR 120 million in 1999 and that it only later emerged that the loan was tied to conditions imposed unilaterally by the EIB requiring stringent cuts in passenger services through the closure of 32 lines in 2002?

| 2. | Does the Commission consider it realistic that a private company will want to take over responsibility for the passenger services to be closed without additional government subsidies to compensate for the losses and ensure profitability? |
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2.

Does the Commission consider it realistic that a private company will want to take over responsibility for the passenger services to be closed without additional government subsidies to compensate for the losses and ensure profitability?

| 3. | Is the Commission aware that in October 2001 the Slovakian government and the Slovakian railways ZSR not only refused to disclose the conditions of the loan to the international environmental organisation Friends of the Earth, but that the EIB, despite the announcement of its new information policy in November 2000, also refused to do so, referring to the responsibility of the other parties involved? |
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3.

Is the Commission aware that in October 2001 the Slovakian government and the Slovakian railways ZSR not only refused to disclose the conditions of the loan to the international environmental organisation Friends of the Earth, but that the EIB, despite the announcement of its new information policy in November 2000, also refused to do so, referring to the responsibility of the other parties involved?

| 4. | Does the Commission consider it right that there should be secrecy surrounding the far-reaching effects on government policy of loans granted to governments by a government-owned bank? Is this consistent with the proper functioning of the parliamentary democracy that is an established standard within the EU and the openness that it requires? |
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4.

Does the Commission consider it right that there should be secrecy surrounding the far-reaching effects on government policy of loans granted to governments by a government-owned bank? Is this consistent with the proper functioning of the parliamentary democracy that is an established standard within the EU and the openness that it requires?

| 5. | Are the implications of this loan consistent with the Commission's policy to promote rail transport and prevent an unnecessary shift from rail to road in the new Member States? |
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5.

Are the implications of this loan consistent with the Commission's policy to promote rail transport and prevent an unnecessary shift from rail to road in the new Member States?

| 6. | What action is the Commission taking to enable future EU Member State Slovakia to maintain its public service provision in the field of passenger rail services? |
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6.

What action is the Commission taking to enable future EU Member State Slovakia to maintain its public service provision in the field of passenger rail services?

Answer given by Mr Verheugen on behalf of the Commission

(19 June 2003)

(19 June 2003)

| 1. | The Commission is not aware of any allegedly secret conditions concerning the loan granted by the European Investment Bank (EIB) to the Slovak Government in 1999.
  The Commission was consulted on the proposal in accordance with Article 21 of the Bank's Statute and gave a favourable opinion on the project prior to its presentation to the Bank's Board of Directors. The Commission is also represented on the Bank's Board of Directors, which on 20 July 1999 approved a loan of EUR 200 million to Slovakia's railway company, ZSR, for the upgrading and modernisation of the Slovak railway network and the purchase of rolling stock.
  The EIB issued a press communiqué on 26 July 1999, on signature of the loan. This is posted on the Bank's website under: (http://www.eib.org/news/press/press.asp?Press=1026).
  Loan conditions are never imposed unilaterally by the EIB: in negotiating the terms of loan contracts, the EIB and potential lenders always operate as equal partners. The conditions of this loan were based on independent studies and restructuring action plans of the Slovak government that wished to urgently re-establish financial stability in the country's railway services. |
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1.

The Commission is not aware of any allegedly secret conditions concerning the loan granted by the European Investment Bank (EIB) to the Slovak Government in 1999.

The Commission was consulted on the proposal in accordance with Article 21 of the Bank's Statute and gave a favourable opinion on the project prior to its presentation to the Bank's Board of Directors. The Commission is also represented on the Bank's Board of Directors, which on 20 July 1999 approved a loan of EUR 200 million to Slovakia's railway company, ZSR, for the upgrading and modernisation of the Slovak railway network and the purchase of rolling stock.

The EIB issued a press communiqué on 26 July 1999, on signature of the loan. This is posted on the Bank's website under: (http://www.eib.org/news/press/press.asp?Press=1026).

Loan conditions are never imposed unilaterally by the EIB: in negotiating the terms of loan contracts, the EIB and potential lenders always operate as equal partners. The conditions of this loan were based on independent studies and restructuring action plans of the Slovak government that wished to urgently re-establish financial stability in the country's railway services.

| 2. | In accordance with Community Directives, ZSR has been split into an infrastructure public entity (ZSR) and an operating company (ZS). The division was based on a Government resolution dated 18 October 2000 and approved by Parliament that came into effect on 1 January 2002. ZS, which is in charge of passenger services, is a joint stock company 100 % owned by the State. ZS indeed benefits from operating subsidies that are included in the annual State budget, and it would be for the Slovak Government to extend this system of subsidies to any privately operating company if the case would arise.
  The Commission is not aware of the circumstances under which the Slovak authorities intend to hand over exploitation of rail passenger services to another railway undertaking. In general, however, it can be stated that undertakings are not likely to take over services if they assess that exploitation is not feasible. |
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2.

In accordance with Community Directives, ZSR has been split into an infrastructure public entity (ZSR) and an operating company (ZS). The division was based on a Government resolution dated 18 October 2000 and approved by Parliament that came into effect on 1 January 2002. ZS, which is in charge of passenger services, is a joint stock company 100 % owned by the State. ZS indeed benefits from operating subsidies that are included in the annual State budget, and it would be for the Slovak Government to extend this system of subsidies to any privately operating company if the case would arise.

The Commission is not aware of the circumstances under which the Slovak authorities intend to hand over exploitation of rail passenger services to another railway undertaking. In general, however, it can be stated that undertakings are not likely to take over services if they assess that exploitation is not feasible.

| 3. | The Commission was not aware of the allegation according to which the Slovak government and the Slovak railways ZSR decided not to disclose the conditions of the loan to the environmental organisation Friends of the Earth.
  With regard to the EIB's refusal to disclose information, the Commission understands that the Bank indeed received requests, in 1999 and 2001, from Friends of the Earth (and CEE Bankwatch) to disclose the conditions of the loan provided to ZSR and declined to do so without the agreement of the other parties to the contract. EIB considers that it has an obligation of professional secrecy towards its clients and will not disclose information that is covered by an undertaking of confidentiality. The Bank is currently considering a renewed request from Friends of the Earth (request dated 3 May 2003) and has forwarded it to the Borrower. |
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3.

The Commission was not aware of the allegation according to which the Slovak government and the Slovak railways ZSR decided not to disclose the conditions of the loan to the environmental organisation Friends of the Earth.

With regard to the EIB's refusal to disclose information, the Commission understands that the Bank indeed received requests, in 1999 and 2001, from Friends of the Earth (and CEE Bankwatch) to disclose the conditions of the loan provided to ZSR and declined to do so without the agreement of the other parties to the contract. EIB considers that it has an obligation of professional secrecy towards its clients and will not disclose information that is covered by an undertaking of confidentiality. The Bank is currently considering a renewed request from Friends of the Earth (request dated 3 May 2003) and has forwarded it to the Borrower.

| 4. | As a general rule, the Commission has been requesting all acceding countries to increase transparency and access to information. The Law on Free Access to Information entered into force in Slovakia in January 2001, contributing to the improvement of transparency in public life and the fight against corruption. However, as mentioned in the 2002 Regular Report, whereas awareness among the population has increased, uniform treatment by administrative bodies of documents considered to be secret appears to remain difficult. This issue is still being monitored in the pre-accession phase in the framework of the general monitoring exercise.
  Likewise, the EIB expects borrowers to disclose information in compliance with relevant Community legislation; however, openness as regards other business-related or political considerations are left to the judgement of its borrowers. The Commission understands that the EIB would have no objection to the Borrower/Slovak Government deciding to publish the information contained in the Finance Contract signed with the Bank. |
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4.

As a general rule, the Commission has been requesting all acceding countries to increase transparency and access to information. The Law on Free Access to Information entered into force in Slovakia in January 2001, contributing to the improvement of transparency in public life and the fight against corruption. However, as mentioned in the 2002 Regular Report, whereas awareness among the population has increased, uniform treatment by administrative bodies of documents considered to be secret appears to remain difficult. This issue is still being monitored in the pre-accession phase in the framework of the general monitoring exercise.

Likewise, the EIB expects borrowers to disclose information in compliance with relevant Community legislation; however, openness as regards other business-related or political considerations are left to the judgement of its borrowers. The Commission understands that the EIB would have no objection to the Borrower/Slovak Government deciding to publish the information contained in the Finance Contract signed with the Bank.

| 5. | In its White Paper on European Transport Policy for 2010: time to decide (1), the Commission formulated its aim to maintain the modal share of rail transport in 2010 at 1998 levels. In order to increase the competitiveness of the rail mode and to allow achievement of this aim, railway undertakings have to comply with the requirements of the amended Directive 91/440/EEC (2), which provides that railway undertakings be managed according to the principles which apply to commercial companies. This requirement also applies to services carried out by railway undertakings under public service contracts and obligations concluded between the railway undertaking and the authorities of a Member State.
  The loan was the Bank's first operation in the railway sector in Slovakia. The benefits of the project were to enable the rail company to increase its competitiveness with regard to road transport, in view of the sharp increase of the latter in CEECs, a Union objective, which the Bank supports throughout the Union of 25. Indeed EIB activity in support of rail projects over the last five years (EUR 16,4 billion) is higher than its support for projects in the road transport sector (EUR 13 billion). The benefits were also in line with Slovakia's Union Accession Partnership which specifically highlighted the need for upgrading, including TENs corridors and restructuring in the rail sector. |
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5.

In its White Paper on European Transport Policy for 2010: time to decide (1), the Commission formulated its aim to maintain the modal share of rail transport in 2010 at 1998 levels. In order to increase the competitiveness of the rail mode and to allow achievement of this aim, railway undertakings have to comply with the requirements of the amended Directive 91/440/EEC (2), which provides that railway undertakings be managed according to the principles which apply to commercial companies. This requirement also applies to services carried out by railway undertakings under public service contracts and obligations concluded between the railway undertaking and the authorities of a Member State.

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The loan was the Bank's first operation in the railway sector in Slovakia. The benefits of the project were to enable the rail company to increase its competitiveness with regard to road transport, in view of the sharp increase of the latter in CEECs, a Union objective, which the Bank supports throughout the Union of 25. Indeed EIB activity in support of rail projects over the last five years (EUR 16,4 billion) is higher than its support for projects in the road transport sector (EUR 13 billion). The benefits were also in line with Slovakia's Union Accession Partnership which specifically highlighted the need for upgrading, including TENs corridors and restructuring in the rail sector.

| 6. | Public service contracts and obligations are regulated under the amended Regulation 1191/69 (3). Slovakia has not requested a derogation for this Regulation during the accession negotiations.
  Furthermore, the Commission would like to point out that it has submitted a proposal (4) for a new Regulation on Public service contracts, which reinforces the responsibility of authorities to aim to ensure adequate and efficient public transport services for its citizens. The Regulation would also put in place arrangements for the transparent and competitive award of public service contracts, an approach that has been shown in existing Member States to lead to greater efficiency (and therefore more effective use of public finances) and higher patronage. This proposal is currently under consideration by the Council. |
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6.

Public service contracts and obligations are regulated under the amended Regulation 1191/69 (3). Slovakia has not requested a derogation for this Regulation during the accession negotiations.

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Furthermore, the Commission would like to point out that it has submitted a proposal (4) for a new Regulation on Public service contracts, which reinforces the responsibility of authorities to aim to ensure adequate and efficient public transport services for its citizens. The Regulation would also put in place arrangements for the transparent and competitive award of public service contracts, an approach that has been shown in existing Member States to lead to greater efficiency (and therefore more effective use of public finances) and higher patronage. This proposal is currently under consideration by the Council.

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(1)  COM(2001) 317 final, OJ C 240 E, 28.8.2001.

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(2)  Directive 91/440/EEC of 29 July 1991, OJ L 237, 24.8.1991, amended by Directive 2001/12/EC of the Parliament and of the Council of 26 February 2001 on the development of the Community's railways, OJ L 75, 15.3.2001.

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(3)  Regulation 1191/69/EEC of the Council of 26 June 1969, OJ L 156, 28.6.1969, as amended by Council Regulation (EEC) No 1893/91 of 20 June 1991 on action by Member States concerning the obligations inherent in the concept of a public service in transport by rail, road and inland waterway, OJ L 169, 29.6.1991.

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(4)  Amended proposal for a Regulation of the Parliament and of the Council on action by Member States concerning public service requirements and the award of public service contracts in passenger transport by rail, road and inland waterway, (COM(2002) 107 final - 2000/0212(COD)), OJ C 151 E, 25.6.2002.

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