Austria invests in rail and more tunnels for transport

FROM THE ECONOMIST INTELLIGENCE UNIT

Austria’s National Council (the lower house) has allotted the necessary funds to invest billions into rail infrastructure between 2013 and 2017. It authorised the minister for transport, innovation and technology, Doris Bures, to spend up to €26.7bn on infrastructure projects; an additional €6.2m is available through the existing law on federal railways, and another €493m for contracts with private rail companies. The funds are earmarked for infrastructure investment, to maintain existing structures and to close gaps in the current rail network. The opposition parties have sharply criticised the law, citing a lack of detailed information on the respective projects and highlighting the high level of existing debt of Austrian Federal Railways.

Semmering tunnel

April 2012 saw the start of one of Austria’s largest and also most controversial infrastructure projects, the Semmering tunnel between the towns of Gloggnitz in Lower Austria and Mürzzuschlag in Styria. The 27-km-long tunnel is expected to be finished in 2024 and will allow trains to travel underneath the Semmering mountain pass at up to 230 km/hour, rather than going over it at slow speeds, thereby reducing travel time by 30 minutes. Although the advantage for southbound rail travel has been hailed by politicians, the project has been bedevilled by exploding costs and harsh criticism from environmentalist groups. Initially budgeted at €3.1bn, the tunnel is expected to cost significantly more as calculations of financing costs date back to early 2011, and the same is true for the calculation of costs for materials and labour. One aspect on which the government seems to be relying is a partial absorption of costs by the EU, which has signalled that it would consider including the project in the Trans-European Transport Network, which would make several community instruments and grants available to Austria. Negotiations are currently under way, but sceptics have labelled the undertaking a “marketing gag”. The European Parliament has not voted on including the Baltic-Adriatic transport corridor into the Trans-European Transport Network and the final configuration of the corridor has not been finalised either. Some drafts suggest trains travelling at high speed through Carinthian tourism villages, a plan which meets with strong resistance in those areas.

Uncertainties on investment

The Semmering project is one of three massive tunnel projects in Austria; the Brenner base tunnel in Tyrol is expected to be finished by 2026, and the Koraple tunnel between Carinthia and Styria by 2022. Economists estimate the total cost for the three projects at between €50m and €200m, highlighting the many variables which remain undetermined. Out of the three projects, the Semmering project is deemed the most useful, as it will help cut the train travel time between Austria’s two largest cities. Currently, the distance can be travelled fastest by car, and therein also lies one of the uncertainties regarding return on investment: Austrians currently travel more on roads than on rail. If this trend cannot be reversed, the success of massive rail projects will be doubtful. Moreover, environmental groups have been protesting against the Semmering tunnel for years. The Alliance for Nature has called on the Constitutional Court to rule on previous administrative notices regarding environmental compatibility. Environmentalists claim that the tunnel endangers the water supply and is also endangering the old Semmering railways’ status as world cultural heritage. Most observers agree, however, that these concerns will have little impact on the project.