EU railway law to halt 'stagnation, decline'

It recommends full "institutional separation" as the best model.

But it says that a softer option, in which the two parts remain under one "holding structure," but in which day-to-day business is separated by "Chinese walls," is also acceptable.

Firms which fail to do either will be locked out of providing passenger services in other EU countries when the sector opens up fully to cross-border competition in 2019.

The commission said the move will save passengers and railway firms €40 billion by 2035.

It noted that the industry, which is worth €73 billion and which employs 800,000 people in Europe, is "currently facing stagnation or decline," with operators in Belgium, Bulgaria, Portugal and Spain applying for government bailouts in recent years.

"We can take the tough decisions now ... [or] we can accept an irreversible slide down the slippery slope to a Europe where railways are a luxury toy for a few rich countries and are unaffordable for most in the face of scarce public money," Kallas said.

In other measures, the European Railway Agency (ERA), based in Valenciennes, France, is to issue EU-wide "safety passports" for railway vehicles and operators.

The commission said EU countries have 11,000 different safety rules in place and that it can take two years and cost €6 million to get permits for a new locomotive to operate abroad.

It said the ERA move will save firms €500 million by 2025.

Zooming in on the "holding structure" idea, the two parts of the new-model companies will have separate decision-making bodies, separate accounts, separate IT systems to stop leaks of commercially sensitive information from one to the other and "cooling off periods" for executives who switch sides.

The commission said national incumbents currently control over 90 percent of the passenger market in 16 out of the 25 EU countries which run trains.

In one example of how they strangle competition, Deutsche Bahn currently charges passengers up to 40 percent less for tickets than its competitors can. In another case, Austria's OBB Infrastruktur increased track access costs for a competitor, Westbahn, when it started operations on the Vienna-Salzburg line.

The UK-based International Railway Journal, an industry paper, reported on Thursday that Austria, Germany and Italy lobbied to stop Kallas from enforcing the full "institutional separation" model only.

His bill now goes to MEPs and EU countries for amendments.

But a statement by a Deutsche Bahn source to Reuters indicates the lobbying is set to go on. "[The bill is] not acceptable, because the planned remedies actually lead to a separation," the contact said.

"We think the German model, with an integrated company, is a good one, a successful one. These structures in Germany do not only allow competition, they support it," a German transport ministry spokesman noted.