Santer set for TENs showdown

Date: 20/06/1996

By Tim Jones

BEHIND the headlines of EU summitry, the reality is often very different.

Presidents and prime ministers talk about how vital the single market is and then sanction infringements, or wax lyrical about the need for tax harmonisation when they have no intention of changing their own regimes.

But few issues so graphically underline the chasm between rhetoric and reality as the Trans-European Networks (TENs).

Commission President Jacques Santer has promised to turn this weekend's Florence summit into a showdown with member states over the question of TENs.

At least four of them - Germany, France, the UK and the Netherlands - have made it more than clear that they will not stump up the extra 1 billion ecu Santer has asked for to plug perceived financing gaps in Europe's biggest transport projects.

Ever since the TENs idea first entered the public arena in 1993, the talk has always been about money.

It was presented as a job-creation programme: Franklin Roosevelt had returned from the grave with a vast public-works plan worth 100 billion ecu designed to get Europe's 18 million jobless back to work.

But it was never quite like that.

The projects were either already under way or in the planning stage when Santer's predecessor Jacques Delors published his White Paper on Growth, Competitiveness and Employment - the origin of the TENs as part of a grand New Deal-style strategy.

For Delors, combining a collection of disparate cross-border road, rail, telecommunications and energy links would achieve two related aims.

Firstly, it would pool the planning process and ensure that 'red tape' between member states would not stymie progress on essential construction.

Secondly - and more importantly to Delors - by giving projects that were already under way a European significance, the EU could portray itself as a creator, financing and master-minding a physical as opposed to a theoretical single market.

The TENs were, in the words of Transport Commissioner Neil Kinnock, to be a “patchwork turned into a network”.

Delors and his successors wanted to make sure that the fiasco over the funding of the massive Eurotunnel project between France and the UK never happened again.

Huge cost overruns and a paranoia about public financing in the UK led to the builder-operator running up debts that cost more to repay every year than it received in revenue.

Drawing up a TENs 'hit-list' of 14 priority projects would ensure that they received international prominence. Private finance would be attracted to them and they would be given an impetus that a single project on the peripheries of Europe would otherwise never have.

At their Essen summit in December 1994, the Union's heads of state and government finally drew up the priority list and assigned more than 2.3 billion ecu in financing straight from the EU's budget to help them.

But, in all the debate about TENs, it is often forgotten that the vast bulk of the money to pay for them comes either from the private sector or from the various member states. It does not come from the Union.

The EU's contribution comes from the European Investment Bank, which has invested close to 7 billion ecu in the projects so far, or from the 2.3-billion-ecu budget line created specifically to finance early analyses and loan subsidies.

The extra 1 billion ecu - said to be available from underspending in the agricultural section of the Union's budget - would be added to the EU's contribution over five years. It would simply help to pay for studies, especially those on the environmental impact of projects or trial construction, and would not prime the pumps of actual construction.

However, at the same time as the Commission is asking net contributors to the EU's budget to forego 1 billion ecu in returned funds, it is also reminding them every day that they must reduce their budget deficits and public debt if they want to join a single currency in less than three years' time.

It is little wonder that they are more than reluctant.

Moreover, there is much more to the difficulties facing the TENs than a lack of money. Certainly, some of them - particularly the high-speed rail links - will be hard-pressed to raise the investment they need to be completed on time.

But these difficulties are often linked to administrative log-jams as much as to a shortage of money.

An internal paper produced by DGVII, the Directorate-General for transport, has identified a deficit of 1.7 billion ecu in the funding of the projects by 1999. The biggest problem, it says, will be on the Paris-Bonn-Cologne-Amsterdam-London high-speed rail link, known as PBKAL. This project alone is short of 430 million ecu.

It is true that this 16-billion-ecu project, which has been germinating for 14 years, needs investment. Out of an 868-kilometre network, only the line from Lille to the Channel Tunnel is operational.

Transport ministers talk about having the whole system up and running by 2005, but the Dutch have only just decided on the route of the Amsterdam to Antwerp line, and a consortium for designing, building, owning and operating the high-speed link from London to Folkestone was only chosen three months ago.

Construction was under way in Germany, southern Belgium and France, but everyone was reluctant to move until the Belgians had decided what to do.

This took many years because of the shortage of money, both at national government level and on the part of the national railway.

There were also problems with route trade-offs between the country's different linguistic communities. It took the Belgian government seven years to decide how to finance three TGV lines.

Construction of the expensive Berlin to Verona high-speed rail link has hardly begun. Work is under way on the line from Berlin to Nürnberg, but differences between the German, Austrian and Italian governments have meant that the key to the project - a tunnel through the Brenner - is years away even from being started.

The Commission calculates that the Berlin-Verona project needs 160 million ecu, although this is mostly to finance the cost of design studies including supplementary analysis of the base tunnel.

TGV-Est, a high-speed rail link running from Paris to southern Germany via Luxembourg, is short of 230 million ecu to close the financing package for the first stage of the work, and the TGV from Lyon to Turin needs 160 million ecu for a trial bore for a main tunnel.

While the Betuwe conventional rail/combined transport line through the Netherlands into Germany is said to be 150 million ecu short, this is still far from even being started. Work had been due to begin in 1995-96, but enormous planning difficulties and environmental complaints have held things up - and even if the project was given extra money tomorrow, it would still be years from completion.

The Commission says that the Øresund link between Copenhagen and Malmö also needs extra cash, although this is a fact disputed by those directly involved in the project. This 3.6-billion-ecu scheme combines road and rail in a 16-kilometre route of tunnels and bridges.

The consortium assigned to build and operate the project announced last year that it had gone slightly over budget because contracts awarded for constructing synthetic islands in the bay had cost more than expected.

However, the consortium relies on raising money directly on the capital markets with the protection of a guarantee being given to bondholders from both the Swedish and the Danish governments.

Work is proceeding according to plan and money-raising has not been a problem. The Commission analysis simply points to the need for environmental studies on the project.

It may be that heads of state and government will sidestep the issue at this weekend's summit, anxious to avoid another TENs battle at Florence when they have enough on their plates with John Major and his 'mad cow' problems.

But they may decide it is time to be cruel to be kind, telling the Commission it will not get its extra money and should concentrate on finding solutions to the real problems - continued national administrative barriers and the reluctance of the private sector to sink cash into very expensive high-speed rail projects which concentrate on moving people rather than freight.