▶ This month, the German Council of Economic Experts issued its latest annual report, entitled: “Tackling Failures, Modernising with Determination”.

▶ This Council is the official body of five professors that is required by law to make scientifically based recommendations to the government on how to strengthen Germany as a business location.

▶ This year, they call for the unbundling of the state-owned infrastructure manager and rail operator, and explicitly state that the benefits of introducing this more than offset costs.

“The weakness of industry and the duration of the weak phase suggest that the German economy is being held back by structural problems…” states Professor Monika Schnitzer, Chairwoman of the Council. The rail system is a crucial part of the economy, but with a big structural problem: over recent years, we have witnessed how it does not deliver.

Here is a key excerpt in the recent annual reportabout the vertically integrated state-owned rail incumbent, Deutsche Bahn (DB Group)*:

“A structural unbundling of the infrastructure manager from the rest of the DB Group could help improve the quality of the rail infrastructure. On one hand, it could enhance transparency regarding the use of public investment grants for rail infrastructure projects.

On the other hand, it could prevent inefficient investment prioritisation driven by corporate interests, which may occur when investments are aligned with the goals of DB-owned rail operators rather than the objectives of the entire rail network (Monopolies Commission, 2015a).

Furthermore, effective competition between rail operators could develop. As a vertically integrated group, it is in DB Group’s interest to maximise its overall profit. Despite regulatory safeguards, group companies may be granted advantages over competitors, for example in accessing rail infrastructure (Monopolies Commission, 2023a). Strong competition leads to cost reductions, innovations, and higher quality…”

The extent to which the newly established public-interest infrastructure company, DB InfraGo, created in January 2024, will achieve these objectives remains difficult to assess ….

Nevertheless, considering the efficiency and competition benefits outlined above, the overall assessment favours the positive effects of structural unbundling.” (emphasis added by ALLRAIL)

* This excerpt has been automatically translated from German using a translation tool for clarity and accessibility.