Deutsche Bahn Sell-off: German Parliament Gives Green Light to Railway Privatization

The privatization of Germany's railway company has been on the cards for 14 years, but disagreements over how to privatize the company, and if it was even desirable, held up the sell-off. Now Germany's lawmakers have approved a partial privatization.

Next stop the stock market: German lawmakers have voted in favor of privatizing nearly a quarter of Deutsche Bahn.
AP

Next stop the stock market: German lawmakers have voted in favor of privatizing nearly a quarter of Deutsche Bahn.

After years of wrangling between Germany's two main political parties, the country's lawmakers have approved a controversial partial privatization of Deutsche Bahn, the national railway company.

Politicans from Germany's grand coalition government, which comprises the center-right Christian Democratic Union (CDU) and the center-left Social Democratic Party (SPD), voted for the sell-off of part of Germany's last major state-owned company. The opposition parties -- the far-left Left Party, the Greens and the business-friendly Free Democratic Party (FDP) -- opposed the privatization.

According to the decision passed by Germany's parliament, the Bundestag, on Friday, Deutsche Bahn's passenger, freight and logistics divisions will be spun off into a holding company, 24.9 percent of which will be privatized. The nationwide network of train stations and tracks will remain entirely in state hands, however.

The government plans to carry out the partial privatization with an initial public offering in November, which Transport Minister Wolfgang Tiefensee says could raise up to €8 billion ($12.4 billion).

Deutsche Bahn welcomed the decision by the parliament. "It's a good day for customers, taxpayers and employees," the company's CEO Hartmut Mehdorn told the Associated Press. He added the privatization would safeguard the future of Deutsche Bahn and its 237,000 employees.

Transport Minister Wolfgang Tiefensee, who belongs to the SPD, said the sell-off would improve train services and said a good compromise had been reached. According to Tiefensee, the state "would remain in control of the company and that's the way it will stay," while the train tracks would stay "property of the people."

However, not all members of his party agreed: A total of 27 SPD parliamentarians from the party's left wing voted against the privatization.

They were joined by Germany's opposition parties, which for varying reasons objected to the sell-off. Gregor Gysi, floor leader of Germany's far-left Left Party, warned that rail fares would increase, as private investors would demand a return on their investments. Fritz Kuhn from the Green Party said he doubted whether the privatization would lead to more road traffic switching to rail, as the government had predicted.

The privatization of Germany's national railway company has been on the cards for 14 years, since Deutsche Bahn AG was formed in 1994 as a successor to the rail companies of the former West and East Germany, but the sell-off repeatedly came off the tracks because of disagreements over how to conduct the privatization and if it was even desirable.

Germany's grand coalition government has been divided between the center-right Christian Democrats who have been backing privatization and have been in favor of selling a far larger chunk -- up to 49.9 percent of the company. In fact, some senior CDU members still insist that the 24.9 percent sell-off is only the first step.

The Social Democrats have been concerned that privatization would lead to job cuts. In October last year, the SPD rejected the sell-off at its party conference.

A compromise deal, however, was struck after the original proposals were changed in two ways: Firstly, it was suggested that a holding company for Deutsche Bahn's passenger, freight and logistics divisions should be set up and only part of this company, rather than the whole company, should be privatized. And, secondly, only 24.9 percent of the company would be privatized, thereby preventing a foreign investor from holding a blocking minority, set by German law as a 25-percent stake in a company. The two parties agreed the deal in April this year.

maw/ddp/ap/reuters

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