Germany Invests in Rail, But Is It Enough?

Cologne Germany train station
Central train station in Cologne, Germany (Unsplash/Kai Pilger)

Germany is investing €86 billion over the next ten years in its aging rail network. The hope is to shift Germans toward less carbon-intensive forms of travel.

The federal government will cover the bulk of the cost, €62 billion. Deutsche Bahn, the state-owned railway company, will pay the remaining €24 billion. The money will be used to update tracks, stations, signal boxes and energy supply systems.

The government also intends to cut fares by 10 percent for trips of 50 kilometers or more in order to incentivize the use of trains for long-distance travel.

With this package, Germany kills two birds with one stone: it modernizes its infrastructure while reducing carbon emissions.

It also demonstrates Germany’s willingness to spend. Read more “Germany Invests in Rail, But Is It Enough?”

Renationalizing British Utilities and Rail Would Be a Mistake

British post box
A Royal Mail post box in London, England, July 26, 2011 (Tim Miller)

Rising energy rates and railway fares in the United Kingdom are lending credence to the argument that privatization was a mistake.

YouGov last year found majorities in favor of taking energy, water and railways back into state ownership.

Telecom is the exception. Only 30 percent believe it should be run by the government.

The reason may be that the benefits of telecom privatization have been obvious whereas those of other privatizations are harder to discern.

Compared to the 1970s, however, utilities and railways provide a far better service today. Read more “Renationalizing British Utilities and Rail Would Be a Mistake”

Macron’s Liberalization Has Made Travel More Affordable in France

View of the Arc de Triomphe in Paris, France
View of the Arc de Triomphe in Paris, France (Unsplash/Rodrigo Kugnharski)

Emmanuel Macron’s liberalization of intercity public transport in France is paying off.

Until 2015, railroads had a monopoly on domestic ground routes of 100 kilometers or more. Macron — then economy minister, now president — wrote legislation that allowed buses to compete.

Bloomberg reports that 6.2 million passengers took a long-distance bus in 2016 and bookings are up another 25 percent this year.

That’s still a fraction of the more than 100 million annual high-speed train passengers, but competition from buses is forcing the state-owned railway to cut rates. Read more “Macron’s Liberalization Has Made Travel More Affordable in France”

Train Attack No Reason to Return European Border Controls

Friday’s foiled terror attack on the high-speed train from Amsterdam to Paris is no reason to reinstate border controls in Europe. The freedom of movement is one of the European Union’s greatest accomplishments and one that most directly benefits its citizens.

Of course, open borders make it easier for criminals and terrorists to travel between countries. But closing them — or impeding travel and trade with cumbersome controls — would be an emotional overreaction. Read more “Train Attack No Reason to Return European Border Controls”

East Coast Rail’s Problematic Return to Market

Earlier this week, the East Coast rail franchise that links London to Inverness via key cities such as Doncaster, York, Edinburgh and Glasgow was handed back to the private sector. Given the past performance of companies operating the franchise, the handover has not been without controversy.

The first operator, GNER, owned by Sea Containers, paid £1.3 billion to run the franchise for ten years. This was a third higher than rivals FirstGroup, Virgin Rail and a joint venture between Denmark’s DSB Railways and freight operator EWS had offered. It also worked out at significantly more than the £22 million they had been paying in previous years. A year later, the government took away the franchise when GNER faced financial difficulties, including the bankruptcy of its parent company.

Then in 2007, National Express won the contract. They outbid rivals Arriva, First and Virgin Rail and promised to pay a £1.4 billion premium to the Department for Transport over seven years.

But just two years later, National Express announced it was pursuing talks with the government for possible financial assistance in operating the franchise. Little came of the talks and National Express said it would default on the franchise before the end of 2009. Read more “East Coast Rail’s Problematic Return to Market”

India to Rationalize Taxes, Boost Infrastructure Spending

Arun Jaitley, India’s finance minister, unveiled a series of tax reforms and infrastructure initiatives on Saturday in the conservative government’s first full budget since Narendra Modi came to power last year.

Jaitley said a national sales tax would be in place by April next year to replace a complex regime of local fees that hampers business growth.

He also announced a reduction in the corporate income tax rate from 30 to 25 percent and a simplification of the code.

Both measures should help Modi meet his campaign promises to liberalize the world’s tenth largest economy and boost growth rates. Read more “India to Rationalize Taxes, Boost Infrastructure Spending”

Obama Proposes “Grand Bargain” on Tax Reform, Infrastructure

President Barack Obama offered opposition Republicans a “grand bargain for middle-class jobs” on Tuesday that would reduce corporate tax rates while investing billions of dollars in infrastructure projects.

The president, who previously appeared to have little interest in tax reform, proposed to cut America’s corporate tax rate of 35 percent — the highest in the industrialized world — to 28 and give manufacturing companies a preferred rate of 25 percent. In a speech in Tennessee, he also suggested that a minimum tax on foreign earnings should be instated to fight tax evasion.

The Democrat, who was elected to a second term in November, conditioned his support for tax reduction on extra infrastructure spending to repair bridges and roads as well higher education spending. Read more “Obama Proposes “Grand Bargain” on Tax Reform, Infrastructure”

Putin Promises Infrastructure Spending, Investors Skeptical

President Vladimir Putin on Friday promised to invest more than $13 billion in updating Russia’s infrastructure but cautioned that there was no “magic wand” that could resolve the nation’s economic problems altogether.

Speaking at a business forum in his hometown of Saint Petersburg, the Russian leader announced plans to build a new ring road outside Moscow as well as a high-speed rail connection from the capital to Kazan, an industrial hub in Tatarstan. He also seeks to update the Trans Siberian railway to Russia’s Far East.

To finance the projects, the government will tap into the $87 billion National Welfare Fund, otherwise intended to provide for pensions.

But with inflation at 7.4 percent and growth forecast to be 2.4 percent this year, even the promise of a lucrative energy deal with China valued at $270 billion might not lift the nation’s spirits. Foreign investors worry that liberals are increasingly marginalized in favor of conservatives in Putin’s government who advocate a more statist economic policy. Read more “Putin Promises Infrastructure Spending, Investors Skeptical”

High-Speed Rail Not Coming to Britain Fast Enough

Great Britain, inventor of the railway and home country to Sir Isambard Brunel, is once again taking its time on a proposed high-speed rail network, known as HS2 that is meant to connect London with the north of England.

Currently, Britain has one such high-speed rail line, known unsurprisingly as High Speed 1, and it connects St Pancras International in London with the Channel tunnel. It was the first new mainline railway to be built in the United Kingdom for a century and, as an added bonus, it was finished on time, on budget and is surpassing its original forecasts for growth.

With this precedent perhaps the rest of Britain’s high-speed rail network may now emerge? Read more “High-Speed Rail Not Coming to Britain Fast Enough”