Opinion of the Economic and Social Committee on the:

- 'Communication from the Commission on the development of the Community's railways',

- 'Application of Directive 91/440/EEC: Future measures to develop the railways', and

- 'Proposal for a Council Directive amending Directive 91/440/EEC on the development of the Community's railways' ()

(96/C 153/04)

On 4 December 1995, the Council decided to consult the Economic and Social Committee, under Article 75 of the Treaty establishing the European Community, on the above-mentioned communication, application of Directive and proposal.

The Section for Transport and Communications, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 14 February 1996. The Rapporteur was Mr Liverani.

At its 333rd Plenary Session (meeting of 28 February 1996), the Economic and Social Committee adopted the following Opinion by a large majority, with two abstentions.

1. Preliminary comments

1.1. Directive 91/440/EEC (), which came into force on 1 July 1993, but unfortunately has not yet been transposed by all Member States, has already brought about a considerable innovation in the overall structure and management models of railway undertakings in the single Community area; it can be said that, although the Directive has not achieved all its objectives, changes are taking place in several Member States of the Union.

1.2. Four years on, the principles generally enunciated by the Directive in question have not yet fully become common ground for railway undertakings, the essential role of which in European transport structure and intermodality should be stressed here. In particular, the following principles were laid down:

- railways are undertakings which have a distinct identity in relation to public and social policy aims pursued by the Member States;

- a start has been made on separating, at least in accounting terms, the undertaking responsible for infrastructure from those responsible for commercial services;

- rationalization of the financial situation of railway undertakings;

- access to railway infrastructure will be gradually liberalized on the basis of a toll, the rules for which are laid down generally by the Member States; train paths are allocated by a body responsible for distributing infrastructure capacity, and which may or may not be distinct from the managing body.

1.3. Thus a Directive which provided only the overall framework has to some extent accelerated the process of change for railway undertakings, in such a way as to modify legal and institutional arrangements which had been established for decades.

1.4. The immediate impact of liberalization as defined by Directive 91/440 was rather limited, within the parameters laid down by Article 10; essentially, liberalization of generalized access to railway infrastructure was limited by Directive 91/440 to international combined freight transport. As the Commission points out, rationalization of the undertakings' financial situation is still largely incomplete. As a result, in order to modernize, some undertakings have been forced to incur further debts without state intervention. In such conditions it is impossible for undertakings to play their part independently.

2. Current initiatives for the development of the railways

2.1. Now the changed institutional context brought about by a new acceleration resulting from the European Union's regulatory action is reviving the challenge at a different level.

2.2. The European Commission's philosophy can be summarized as follows: it is proposed that the next step should be liberalization of access for international passenger services on the Community network and for international and cabotage services for the transport of goods and for the combined transport of goods. This step could in the Commission's view increase competitiveness and encourage the development of rail transport, bearing in mind the difficulties for national passenger services, as well as improving communications at Community level. If this statement is a fair interpretation of the Commission's position, it is immediately clear that we are dealing with an acceleration of the liberalization scenario, capable of bringing about firm change in the market situation established over recent decades.

2.3. Passively to await change, or to resist it by defending existing positions, as a rule implies renouncing an active role in developing the new strategic scenario for transport; indeed it is clear that operators able to analyze emerging trends will be able to anticipate the necessary changes, becoming active participants in the transformation and hence not suffering the consequences of changes brought about from outside by the institutional framework. As regards the railway sector in particular, the Committee draws attention to its earlier Opinions and stresses the need for measures to improve the situation.

2.4. The Economic and Social Committee has issued an Opinion () on the two railway Directives - 95/18 on the licensing of railway undertakings and 95/19 on the allocation of railway infrastructure capacity, and the charging of infrastructure fees, which can be regarded as a logical link implementing the philosophy already set out in Directive 91/440 within the limits laid down by Article 10 as regards the economic actors and markets which can be open to liberalization. In that Opinion the Committee pointed out that the Directives did not take sufficient account of the present situation and that, in the interests of rail transport development, problems of transposition and implementation must be solved as a priority. Implementation of these two Directives by the Member States is the necessary precondition for starting to implement access to railway infrastructures by forming a competitive market in available train paths.

3. General comments

3.1. Structural changes and liberalization

3.1.1. Clearly it is not assumed that the logical argument currently dominating the action of the Commission will actually be implemented immediately through an extension of the scope of Directive 91/440, modifying Article 10. The new draft Directive is based on an extension of the existing provisions of Article 10 of Directive 91/440. Essentially the principle of gradual liberalization is adopted for international passenger services and for all freight transport services.

3.1.2. The two Directives on licensing and on allocation of infrastructure capacity are two measures rigorously applying Directive 91/440; they are therefore complementary and do not go beyond its scope. However, there is no doubt that a trend is appearing towards progressive liberalization of rail transport.

3.1.3. Nonetheless, the experience of other sectors in public utility services shows that , if it is possible to adopt a delaying attitude in carrying out modernization, the trend is now clear, and economic actors, whether from the public or private sector, who fall back on a defensive position run the risk of competitive disadvantage in the medium term.

3.1.4. Monopolistic positions in the railway sector correspond to a structural economic crisis arising from the operating constraints which, however, have so far been connected partly with lack of technical harmonization (rolling stock) and partly with the public nature of the service, as it is difficult for such undertakings to compete on the market with other undertakings which are not bound by the same public service obligations. In other cases - such as telecommunications or electricity - the undertakings have succeeded in coping better with the structural changes, with a considerably higher market-derived profit level than can be seen in railway undertakings, which are still largely dependent on the input of public funds.

3.1.5. The European Commission recognizes that the process of liberalizing the railways must be carried out step by step, to take account of the special characteristics of the sector and the impact of the public service provided by the railway undertakings on behalf of States and public institutions. But the European Union maintains that it must continue, albeit gradually.

3.1.6. Nonetheless, the Commission follows the formal recognition of the need for caution in the process of railway liberalization with a new impetus to acceleration of deregulation processes, without yet identifying a plan of action really capable of meeting the specific needs of the sector, as the users and the social partners have a right to expect.

3.2. The impact on undertakings and operators

3.2.1. All this can have profound implications for the strategic development of undertakings in the coming years, bearing in mind that Directive 91/440 alone has already brought about a profound organizational transformation of European railway undertakings, with effects on employment.

3.2.2. The real cornerstone for current liberalization processes in the European Economic Area is the rules for access to railway infrastructure. This question is also closely connected with the plan to develop the railway network on a trans-European scale, investment in which would be partly funded by private capital.

3.2.3. This factor - an innovation on the experience of recent decades - involves the definition of access rules which on the one hand make it possible to finance projects with private capital and on the other lay down the modalities for commercial exploitation of the networks by railway undertakings.

3.3. The economic and social context of full liberalization

3.3.1. The debate is now open on the timescale for full liberalization of access to railway infrastructure, but there is a widespread belief that this market cannot be treated just like any other market; if it were, there could be disadvantages for the competitiveness of railways in relation to other transport modes.

3.3.2. The Commission White Paper on growth, competitiveness and employment (Delors Plan) has increased awareness of the fact that the single market needs to focus strongly on investment in trans-European networks to improve the competitive potential of the European Union: 'The establishment of networks of the highest quality throughout the whole Union and beyond its frontiers is a priority task. It will require a joint, massive and sustained effort on the part of the authorities at all levels and of private operators'.

3.3.3. The Commission's analysis shows that the overall volume of direct investment to be mobilized by 1999 could amount to ECU 400 billion, of which ECU 220 billion would go to transport, ECU 150 billion to telecommunications and ECU 13 billion to energy transport. These are extremely ambitious aims; in order to achieve them it will be necessary to activate mechanisms, procedures and innovative financial instruments in order to match the magnitude of the challenge.

3.3.4. It is clear that mobilizing such a large volume of funds to integrate the networks () in the European Economic Area implies awareness of the difficulties involved. The state of the Community's and the Member States' finances leaves virtually no margin for increasing public funding beyond that already planned. The massive investment required in some sectors, particularly in transport infrastructure, will call for new forms of joint public and private financial participation, together with a financial mechanism comprising all the various sources and forms of financing.

3.3.5. Developing a trans-European rail transport network necessarily implies defining standard conditions to harmonize operation, so as to encourage the formation of an effective rail services market ().

3.3.6. The investment programme to strengthen existing lines and create new lines necessitates entrepreneurial cooperation among European industries.

3.3.7. In earlier decades the railways were national undertakings, often helping to protect internal systems of industrial supply to the disadvantage of consumers. Now, with the opening of the European market and the globalization of the economy, there is a need to go beyond these organizational models.

3.3.8. The need to overcome traditional organizational models with a view to liberalization, albeit gradual, of Community rail services, obliges governments, companies and trade unions to tackle a growing social crisis on various fronts, so that

- from a marked fall in employment at every stage of structural modernization (the current stage in Europe involves the loss of tens of thousands of jobs)

it is absolutely essential to move on, taking account of the effects on users/consumers of the present, public, service, to

- the genuine creation of new job opportunities in the hoped-for next stage of revival of the rail transport system;

- the retraining of serving staff who cannot easily be given early retirement in the present parlous situation of social security systems, which is found throughout the Union.

3.4. A multi-speed Europe for rail transport?

3.4.1. The proposed directive will have a radical impact, both as a factor for acceleration of change and on the scope of the opening of the rail market. The definition of principles for liberalization would be followed by extending the scope of effective opening of access to rail infrastructure for commercial operators.

Thus new Community rules are being planned at a time when European railway undertakings have not yet assimilated the innovation introduced by the adoption of Directive 91/440 and the two Directives on licensing and on the allocation of infrastructure capacity.

3.4.2. The process of transposal of Directive 91/440 shows that a risk is indeed emerging of gradual divergence of Member States' policies at the delicate stage of transposal of Community Directives on the rail sector. This is all the more critical in that the new Directives approved and under discussion return to the problem too rapidly, given the Member States' considerable room for manoeuvre.

3.4.3. Schematically, two alternative extreme approaches can be identified, while the other Member States are found in the intermediate band. On the one hand there is a position which is largely favourable to the process of liberalization, to the extent of having drawn up a privatization plan for railways involving the fragmentation of the commercial undertakings and the creation of competition even in the supply of services. On the other hand, there is a position which is extremely prudent and cautious in adopting the Community approach to liberalization, to the extent that the commercial separation between network manager and commercial undertakings is not even under discussion. A range of intermediate approaches are still being worked out.

3.4.4. The different approaches which will be adopted by national authorities in transposing the Community's directives run the risk of creating a multi-speed rail Europe.

3.4.5. Clearly it is still too early to try to define the impact of railway liberalization on the competitiveness of firms operating in the sector. This is also because the more radical effects of the emerging institutional innovations will be seen only in the coming years, as the directives on licensing and on allocation of infrastructure capacity are implemented and further decisions are taken.

3.4.6. In practice, at any rate up to now, the Community approach to liberalization has not had positive results in terms of competitiveness of the railway system in relation to the other competing modes.

3.4.7. The early 1990s also show a loss of market share in terms of volumes transported, particularly noticeable in rail freight transport.

3.4.8. However, if the market position has not yet shown any reversal of the trends of the last few decades, it is undeniable that the institutional reform initiated by the European Commission has introduced elements of - at least organizational - innovation in the position of railway undertakings, bringing about an acceleration in the transformation of the railways' key role.

4. Conclusions

4.1. The series of observations, arguments and analyses accord with the unanimous assessments made by the Economic and Social Committee in its earlier Opinions on rail transport reform; the view that the time has come for further liberalization of the sector is only tenable if such liberalization is correlated with a consistent, harmonized political choice on the overall reform of the sector in all its aspects - economic, social and managerial, and in particular:

- management autonomy;

- financial rationalization;

- taking problems of external costs into account;

- development of intermodality;

- interoperability problems;

- definition of public service requirements at the European level;

- harmonization in the social field, especially as regards employment problems and working hours; and

- the framing of safety standards and rules at European level.

4.2. More particularly, as regards the proposal for a Council Directive amending Directive 91/440/EEC, the Economic and Social Committee, while endorsing it and acknowledging its logical consistency with the overall approach to transport reform in the single market and with the need to increase the competitiveness of the rail sector, considers that harmonization among the Member States by national implementation of the Directives already adopted and those still awaiting final adoption by the Council of Ministers would greatly facilitate achievement of the stated aims.

4.3. Moreover, the Committee calls upon the Commission to stimulate greater consultation of the social partners in order to quantify the impact on employment should the Directive, thus amended, be rapidly adopted, and avoid likely negative social consequences through a Community support programme to be agreed with the social partners. In this context the Committee also asks the Commission to speed up the presentation of its Communication on public services.

4.4. Finally, the Committee wonders whether it would not be useful, given the complexity of the problems connected with rail transport reform, to have a timetable for reference, as in the case of telecommunications, iron and steel or other equally complex sectors.

Done at Brussels, 28 February 1996.

The President

of the Economic and Social Committee

Carlos FERRER

() OJ No C 321, 1. 12. 1995, p. 10.

() OJ No C 225/90, p. 27; OJ No L 237, 24. 8. 1991, p. 25.

() See OJ No C 393/95, p. 56.

() See ESC Opinion on the 'Proposal for a European Parliament and Council Decision on Community guidelines for the development of the trans-European transport network', OJ No C 397/94, p. 23.

() See ESC Opinion on the 'Proposal for a Council Directive on the interoperability of the European high speed train network', OJ No C 397/94, p. 8.