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02/13/2013 08:09 AM

Losing Steam

Massive Rail Project Haunts Merkel Campaign

The bottom appears to be falling out of one of the costliest construction projects ever undertaken by the German government. Amid delays and cost overruns, government players in the Stuttgart 21 train station venture are looking for the exit door. It could become a problem for Chancellor Merkel ahead of fall elections. By SPIEGEL Staff

German rail CEO Rüdiger Grube has suffered greatly as a result of Stuttgart 21, the controversial large-scale railway construction project in the major southern German city. Enraged citizens have called Grube a swindler and worse. He even received anonymous death threats when a section of Stuttgart's old railway station was demolished to make room for the new project.

Throughout all this, though, Grube knew he could rely on support from German Chancellor Angela Merkel and her administration, the politicians who first elevated construction of a new transport hub to become a key issue for Germany in its role as an economic power.

But that support, too, now appears to be a thing of the past. Last week, three state secretaries from the German government paid a visit to Deutsche Bahn's headquarters in Berlin, where they spent four hours questioning Grube on Stuttgart 21, calling into doubt nearly every bit of planning Grube had ever drafted for the project.

Michael Odenwald, a state secretary at the German Transport Ministry, along with his counterparts Hans Bernhard Beus from the Finance Ministry and Bernhard Heitzer from the Economics Ministry, also hold seats on the supervisory board of Deutsche Bahn, which is currently 100 percent owned by the German government. The three government officials queried Grube's projected costs for the undertaking, also finding fault with its sloppy planning and lack of alternative options. They were particularly relentless on the matter of Deutsche Bahn's estimate of the cost if the project were to be called off: an additional €2 billion ($2.7 billion).

The three state secretaries called that approximation into question, saying there was "cause to believe these costs are artificially inflated." Grube was stunned by this expression of mistrust from his government watchdogs. "Does the government still support Stuttgart 21?" he asked the representatives. Individuals who were present for the discussion say he never got a clear answer. The Deutsche Bahn CEO feels he's been abandoned by the same politicians who have been pushing for the project since 1995.

Containing Collateral Damage

One of the most expensive construction projects the German government has ever undertaken now looks unlikely ever to be completed. Chancellor Merkel's Christian Democrats have already lost a state election in Baden-Württemberg as well as a municipal election in the state's capital of Stuttgart over the issue, with the Green Party installing the governor and the mayor. Now the controversy surrounding this regional train station threatens to impact the national election in September as well.

That's an outcome none of the project's major players wants, and all of them are hurrying to distance themselves as much as possible from Stuttgart 21 and its problems. No one wants to take responsibility for the delays and billions in additional costs the project has run up. Instead, those involved with the project are looking for a more or less acceptable way to shut down the entire venture -- and to keep it from causing collateral damage in Berlin just months before the country's voters head to the polls.

The situation strikes particularly close to home for the state secretaries who also serve on Deutsche Bahn's supervisory board. They have watched the debacle over Berlin's much-delayed new airport unfold over the last months, and know that auditors and lawyers will examine whether to hold not only the project's managers but also the supervisory board accountable for the financial problems that have arisen in the course of the airport's construction.

The government representatives on the Deutsche Bahn supervisory board don't want to let things get that far in the case of Stuttgart 21, so they're stopping CEO Grube in his tracks early on. The chancellor and Transport Minister Peter Ramsauer have every interest in avoiding the same sort of political disgrace that has now enveloped the Berlin airport's two principle constructors, Berlin Mayor Klaus Wowereit and Matthias Platzeck, governor of the state of Brandenburg, which surrounds Berlin.

Only Greens Benefit from Problems

Even the opposition Social Democratic Party (SPD) is getting nervous. Strategists at the party's Berlin headquarters are watching anxiously as their colleagues in Stuttgart continue to fight a losing battle to see the construction project through -- and in doing so, risk losing their party considerable support in the federal elections to be held in September.

At the moment, only the Green Party is benefiting from the situation. "Ramsauer already holds a considerable share of the responsibility for the Berlin airport," says Green Party co-chair Cem Özdemir. "I'm very curious to see if and how the CDU's leading candidate Merkel plans to enter the parliamentary election campaign weighed down by these two major construction project debacles."

The three state secretaries who sit on the Deutsche Bahn supervisory board met for a crisis summit last Thursday, in the hope of preventing any further damage. The three supervisory board members had plenty to talk about -- they were not satisfied with the information they had received from Grube two days before.

"The more I look into this matter, the more skeptical I become," said one supervisory board member. "Does it really make sense to keep hanging on to Stuttgart 21?"

The three state secretaries want to get the Deutsche Bahn supervisory board to call a special session as soon as possible. The date currently under discussion for the meeting is March 5, and the supervisory board would then instruct Deutsche Bahn's executive board to begin discussing with the other parties involved in the project -- the state of Baden-Württemberg, as well as both the city and region of Stuttgart -- how to allocate responsibility for the project's over-budget expenses.

One option the federal government would consider is that of having the project's local partners take on all costs that relate to landscaping around the railway station. It isn't Deutsche Bahn's responsibility, says one supervisory board member, to fund the city of Stuttgart's landscaping. "If the city and the state want it to look nice, they need to do that at their own expense," he says.

No Longer Economically Feasible

Such strategies, though, are essentially just playing for time. The state secretaries know it's highly unlikely that Stuttgart will contribute even a single euro more to this project that has grown so unpopular there and has become such a lightning rod for mass protests. Ultimately, most of the additional costs will end up being shouldered by Deutsche Bahn.

That's why the three state secretaries want to know as precisely as possible what risks the federal government faces as Deutsche Bahn's sole owner. All project figures so far have been calculated either by Deutsche Bahn's executive board or by external consultants the board hired, and the government is no longer willing to rely on those numbers.

The mistrust that has arisen between the supervisory board and Deutsche Bahn's management is considerable. Grube and his executives, the supervisory board says, must have known by last summer at the latest about the billions in excess costs, but the board says it wasn't informed until shortly before its December session.

Now Deutsche Bahn is paying a high price for that presumed sleight of hand. The supervisory board wants to know, for example, exactly why the project still hasn't found a technical solution for over 1,000 supply lines it needs, or why the purchase of more than 2,700 land lots still isn't complete.

What Happens Then?

Current estimates show the project costing at least €2.3 billion more than originally planned. If Deutsche Bahn is required to pay that entire amount, the project will no longer be economically feasible for the company and will result in financial losses, the Deutsche Bahn executive board admitted to the supervisory board last week.

The question now is which route will be less financially painful -- cancelling the project or continuing it? "If it turns out that cancelling the project would lead to even greater losses than continuing it," reads a Deutsche Bahn statement submitted to the supervisory board, then "the danger of a negative return on equity capital" could be an acceptable risk to take. That ending the project would in fact be more expensive, the statement continued, appears to be "at least a possibility, according to the current state of our knowledge."

The state secretaries, though, don't find the projected €2 billion for closing down the project realistic. In reviewing Deutsche Bahn's plans, they found items included in the calculations that weren't actually connected to Stuttgart 21, or that they felt were assessed at too high a rate.

For example, the cost of buying back plots of land that had been sold to the city of Stuttgart was put at €795 million. These properties, however, were recorded as being worth just €25 million when they still belonged to Deutsche Bahn. The state secretaries also found that the calculations included €17.6 million for engineering work that was carried out not as part of Stuttgart 21, but rather during the construction of a new high-speed rail line between the Stuttgart suburb Wendlingen and Ulm, a city of around 125,000 along the main railway route to Munich. The compensation payments to contractors also seemed to be calculated quite generously at €486 million. Deutsche Bahn based that sum on an assertion that contractors would supposedly be entitled to 30 percent of any contract that was cancelled. But that, says one Deutsche Bahn insider, is "complete nonsense." Deutsche Bahn, meanwhile, insists its calculations are correct.

Government Considers External Audit

Since it has been difficult for the three state secretaries on the supervisory board to check the validity of Deutsche Bahn's figures, they are now considering bringing in external inspectors. In a few months' time, those inspectors' verdict could well be the deciding factor in whether or not Berlin shuts down Stuttgart 21.

In Stuttgart, opponents of the multi-billion-euro railway station are dusting off alternative scenarios they had set aside after losing a 2011 statewide referendum on the fate of the project.

One such scenario is the so-called "combination solution," which mediator Heiner Geissler, a former top CDU official, presented in summer 2011 as a possible compromise. In this variation of the plan, only four instead of eight platforms would need to be built underground for intercity trains, while regional trains would remain in the old, aboveground station.

Then there's the "terminus solution," known by its German abbreviation "K21," a rallying cry that can be seen adorning bright green tote bags around Stuttgart. This name actually encompasses at least a dozen different concepts, but all have one thing in common: They propose giving up on the underground station entirely, instead using the existing tracks in the current terminus-style station and renovating the station's historical main hall.

In Tübingen, just south of Stuttgart, Mayor Boris Palmer of the Green Party is one of the most prominent critics of the construction project, and he considers the K21 approach the best option. "This way the current railway station, which is fully functional, is simply retained," he says.

One of the most important points in favor of the terminus solution is its flexibility. "K21 is a modular construction concept that can be implemented in stages," Palmer explains. For example, he says, the first step could be to renovate the existing station building. After that, decisions could be made bit by bit concerning other measures, for example a possible link to the new stretch of track between Wendlingen and Ulm.

All together, Palmer says, the most recent estimates put the cost of this plan at between €1.3 billion and €1.7 billion, or around a quarter of the projected cost for the Stuttgart 21 project. Furthermore, he adds, the K21 approach "can be oriented according to the actual transportation needs and financial resources of the city and the state," whereas Stuttgart 21 is an "all or nothing" project. "That's just not a modern approach," Palmer believes.

Examining Alternatives

But while Palmer and others within the protest movement are hatching plans, the state government is consciously holding back. The government stands by its obligation to support the project, says the office of Baden-Württemberg Transport Minister Winfried Hermann of the Green Party, even though the minister himself has spent decades fighting Stuttgart 21.

Political relations remain tense between Baden-Württemberg's state government coalition partners, with the Green Party generally opposing the project and the SPD supporting it. One critical glance, one statement from the Green distancing themselves from the project, is enough to alarm members of the SPD. This is particularly true of Claus Schmiedel, head of the party's state parliamentary group, who seems to be trying to outdo the opposition in his declarations of how impossibly high the cost of stopping the project would be.

Baden-Württemberg's governor, Winfried Kretschmann of the Green Party, also curtly declared last week that "cancelling the project is not up for discussion." The struggle against Stuttgart 21 is what first brought the Green Party into office, but Kretschmann is trying to support his coalition partner, the SPD. The executive branch of the state government, he says, considers itself bound to honor the results of the 2011 referendum that established support for the project.

The Transport Ministry in Berlin likewise has not officially examined any alternative proposals. "If that were the case and it got out, there would be a serious uproar within the coalition," explains one insider. Still, the same individual believes that it's only a matter of time before the ministry receives the go-ahead to look at other possibilities. "We won't be able to make an objective assessment of the current situation until our specialists are finally allowed to start examining the alternatives in detail," says one ministry official.

Members of an alliance of organizations working to stop Stuttgart 21 don't want to wait that long. Hannes Rockenbauch, a Stuttgart city council member, has been part of the Stuttgart 21 protest movement since 2007 and says he's clear on what the next steps should be.

"Five million euros to €10 million would be enough to straighten back out the worst of Deutsche Bahn's mistakes on the existing station," he says, adding that there would be plenty of time after that to discuss other options with the public. There is only one aspect in which Rockenbauch feels time is of the essence: "We're calling for construction to be halted immediately."

BY SVEN BÖLL, FRANK HORNIG, SIMONE KAISER and ANDREAS WASSERMANN

Translated from the German by Ella Ornstein

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