Train Drain

Schäuble Eyes the Family Silver

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  • Why it matters

    Why it matters

    Finance Minister Wolfgang Schäuble is keen to avoid any new debt from 2014 onwards, and is proposing selling off some of the government shares in partially state-owned rail, post and telecoms companies.

  • Facts

    Facts

    • The government owns 21 percent of Deutsche Post through its KfW development bank – a market value of around €6.4 billion.
    • The government’s share of Deutsche Telecom has a total market value of about €18 billion.
    • Deutsche bahn is 100 percent owned by the federal government.
  • Audio

    Audio

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Finance Minister Wolfgang Schäuble is exploring a fresh attempt to privatize national rail company Deutsche Bahn. According to a finance ministry paper, which Handelsblatt has seen, private investor participation is definitely an option. The report on federal shareholdings was discussed by the cabinet on Wednesday but its approval is now to be delayed after the details were leaked to the media.

The report also reveals that sales of the government’s stakes in Deutsche Telekom, the German telecoms company, and Deutsche Post, the national postal service, as well as the Cologne-Bonn and Munich airports are “intended or under examination.”

A spokesman for Finance Minister Wolfgang Schaeuble said changes to the proposal were still needed. “What I can say overall is that there are no concrete plans for privatisation at Deutsche Telekom, Deutsche Bahn or Deutsche Post,” a government spokeswoman said after Wednesday’s cabinet meeting.

Any exit from the Deutsche Bahn would be particularly sensitive. A first attempt to partial privatization was aborted due to the financial crisis towards the end of 2008. In their coalition agreement, Chancellor Merkel’s center-right Christian Democrats and her junior government partners, the center-left Social Democrats did not lay out how they wanted to proceed with the Deutsche Bahn.

 

This is not the first time a federal exit from national companies has been on the table. One of Mr Schäuble’s predecessors, Hans Eichel, also tried to plug budget holes by selling shares to companies. In the 2005 federal budget, the former minister of finance and member of the Social Democrats had planned for income of around €15 billion ($18.7 billion), prompting bitter accusations from the then opposition Christian Democrats that he was “flogging off” the family silver, and that it was an unsustainable policy.

Deutsche Bahn and Deutsche Telekom were already mentioned in a report from two years ago as candidates for a share sell-off. The federal government still holds 14.26 percent directly in the telecom company, and a further 17.44 percent indirectly through the state-owned KfW development bank. In terms of stock price, that package has a total value of about €18 billion.

The government indirectly owns 21 percent of Deutsche Post through the KfW bank, which equates to a market share value of around €6.4 billion.

“Flogging off the silverware is budget-policy nonsense.”

Sven-Christian Kindler, Green Party budget expert

Sales from shareholdings are a simple and lucrative alternative to other ways of creating income – compared, for example, to politically sensitive cuts in social services, or tax increases.

And Mr. Schäuble could certainly use the money. Starting in the upcoming year, the federal government wants to avoid any new debts. But the opposition is warning the federal government about financing such a move through privatization.

“Flogging off the silverware is budget-policy nonsense,” said Sven-Christian Kindler, the Green Party budgetary expert.

There is no timeframe for action mentioned in the current report. It says: “the participation of private investors can be re-examined, as long as the situation of the companies allows for a stable market environment, and the capital market is receptive to a gradual, profit-oriented privatization of the transport and logistics divisions.”

From the point of view of the transport minister, headed by Alexander Dobrindt, a member of the Bavarian Chrisitan Social Union, these conditions have not been met: “A privatization of the Deutsche Bahn AG is currently not on the political agenda.”

The Social Democrats are adamant too. Carsten Schneider, the deputy SPD chairman, told Handelsblatt, “With the SPD, there will be no strategic change with the privatization of important infrastructure companies,” and added that Deutsche Bahn will remain 100 percent federal property. “An examination report by the federal finance ministry is no basis for such an important decision.”

Actually, the paper from Mr. Schäuble’s office contains no concrete announcements. “One should not overvalue the report,” said Norbert Barthle, the head budget specialist of the CDU. The privatization of the Deutsche Bahn would not be an issue at the moment. “It is mostly a question of policy order and not budget policy, whether and to what extent the federal government is considering the participation of companies under private law.”

 

German Government Shares-02

 

Jan Hildebrand has won several journalism prizes for his work. He is the deputy bureau chief of the Handelsblatt Berlin office. To contact the author: hildebrand@handelsblatt.com.  

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