Railroad renovation: Where will the money come from?

The federal government wants to extensively renovate the German rail network with 40 billion euros. But then the Federal Constitutional Court throws a spanner in the works. Nevertheless, spending on the railways should not be cut, the traffic light decides - and now presents a new financing plan.

In November, passengers were once again made painfully aware of just how badly the German rail network is in need of renovation. Almost every second Deutsche Bahn long-distance train was delayed last month - partly because roadworks have been slowing down traffic for years. The German government wants to change this and invest almost 40 billion euros in upgrading the rail network over the coming years.

However, the Federal Constitutional Court has thrown a spanner in the works with its budget ruling. As a result of the ruling on the Climate and Transformation Fund (KTF), at least 12.5 billion euros were suddenly up for grabs for the modernization of the rail infrastructure. For weeks, it remained unclear whether the government would stick to the planned investments and where the money would come from.

Financing through truck tolls and equity

Since Tuesday night, it has been clear that there will be no cuts to rail spending. The coalition announced that the investments would be financed by other means. There will be no savings measures for the railroads. Previously, it was planned that the billions of euros for the so-called general overhaul of important rail corridors would come from the federal government's core budget in the coming years - primarily from revenues from the expansion of the truck toll. This remains the case.

In addition, the federal government had already decided to increase the equity of the federally owned Deutsche Bahn AG by 12.5 billion euros. A further 12.5 billion euros were to come from the KTF. This has now changed. Instead of the money from the fund, the federal government is aiming for a further increase in equity so that the Group can finance the investments itself, according to circles in the Ministry of Economics. This would continue to secure the "urgently needed investment offensive" in the railroads.

Federal government wants to sell shares in Post and Telekom

There is already an idea of where the money should come from: "We will privatize federal holdings that are no longer necessary and use the proceeds to strengthen Deutsche Bahn," according to finance ministry circles. Der Spiegel" reported that the government only wants to hold a strategic stake of 25 percent plus one share in Deutsche Telekom.

In contrast, the traffic light is said to be planning to divest itself of more shares in the Post. "It is good and right to put federal shareholdings to the test," said Valentin Abel, the FDP parliamentary group's rapporteur for rail policy, when asked. "Especially if this frees up funds for the urgently needed modernization of our infrastructure."

Deutsche Bahn is currently pushing ahead with the sale of its logistics subsidiary Schenker. It is currently looking for a buyer for the well-performing group. However, the funds from the sale are actually primarily earmarked for reducing Deutsche Bahn's billions in debt. It is quite possible that a large part of the proceeds from the sale will now have to flow into the modernization of the rail network.

"The proceeds from the Schenker sale are very welcome for the renovation of the ailing rail infrastructure," said Green transport politician Matthias Gastel. "The management of Deutsche Bahn should no longer have to spend a lot of time looking after a global logistics company, but should finally concentrate exclusively on reliable rail services in Germany."

Full closures from summer

40 heavily used railroad lines are to be completely closed for around five months by 2030 and then completely renovated and upgraded. Work will start next summer on the Riedbahn between Frankfurt and Mannheim, one of the busiest rail corridors in Germany. The renovation of the Hamburg-Berlin line will follow the following year. Deutsche Bahn and the federal government are convinced that the rail traffic situation will gradually improve with each renovated corridor, as the capacity of the overall network continues to increase.

For passengers, however, the construction measures will initially result in further restrictions. For long-distance and freight traffic, travel times will be significantly longer for months due to the complete closures. Regional passengers will have to switch to replacement buses. The planned costs for the renovation of the Riedbahn alone have recently risen and, according to Deutsche Bahn, amount to around 1.3 billion euros.

End of austerity welcomed

The rail industry reacted positively to the federal government's promise not to cut back on rail investments. "This allows rail transport companies and their customers to breathe a sigh of relief for the time being," said Neele Wesseln, Managing Director of the association "Die Güterbahnen". The association organizes Deutsche Bahn's competitors in freight transport. "The traffic lights have rightly recognized that the decades-long austerity course must not be continued."

The interest group Allianz pro Schiene also expressed its delight at the ruling coalition's decision. It is a milestone that the government has agreed to reduce environmentally harmful subsidies in the transport sector, said Managing Director Dirk Flege.