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International Internet Magazine. Baltic States news & analytics Friday, 25.06.2021, 04:28

Cost of Rail Baltica project has increased to EUR 7 bn - European Court of Auditors

BC, Riga, 16.06.2020.Print version
The European Court of Auditors concludes that in the Rail Baltica high-speed rail project has become more expensive by EUR 2.352 bn to EUR 7 bn euros in a relatively short period of time, Luc T'Joen from the European Court of Auditors said during a joint meeting of the Saeima European Affairs Committee and Public Expenditures and Audit Committee today, referrred LETA.

"According to the European Court of Auditors, the current real cost is not the initially projected EUR 4.648 bn, or the revised projection of EUR 5.8 bn currently allocated to the project, but EUR 7 bn, and there is a risk that these costs will increase in the future," said T'Joen.

He added that the European Court of Auditors' audit also found that the economic sustainability of the Rail Baltica project was unclear, as north-south traffic was insignificant and road and sea transport were predominant.

"For the project to be economically sustainable, it has to be a mixed passenger-cargo line. For the project to pay off in the long run, the traffic density needs to be higher,'' he said.

He also pointed out that the European Court of Auditors considered that there were risks to the project being completed on time and that no decisions had yet been taken on how to manage the project in the long term. Also, the Rail Baltica project still does not have a plan to connect it to the existing railway lines of different gauges, nor has a connection with Poland been discussed.

Mihails Kozlovs, a representative of the European Court of Auditors, added that the audit assessed the work of the European Commission in a total of eight different transport connections in different regions of Europe.

''Compared to other projects, Rail Baltica is not lagging behind and even looks better. It is likely that the construction of the railway line will be completed by 2030 with a possible time reserve. Three years is the smallest delay among the evaluated projects, "said Kozlovs.

He also pointed to the increase in costs, explaining that there are risks of artificially increased costs. To date, EUR 800 mln has been allocated to the project from the European Union and EUR 80 mln has been disbursed.

Kozlovs also emphasized that the European Court of Auditors considered that there were risks of project delays due to disagreements between project participants. The European Court of Auditors considers that the European Commission should require project participants to provide a better quality cost analysis.

"The audit did not provide assurance on freight and passenger flow forecasts. The region covering Rail Baltica has a very small population that will not be able to provide the required number of passengers. It is unclear whether the expected freight flow will compensate for the shortage of passengers. The European Court of Auditors does not deny that freight can compensate the shortage of passengers to make the line sustainable, but we have not yet seen measures to make this happen," said Kozlovs.

Meanwhile, Kozlovs also admitted that cooperation between the European Commission and the project participants on the implementation of the project is one of the best which was assessed.

Deputy State Secretary of the Ministry of Transport Dins Merirands pointed out to the participants of the joint sitting of the Saeima committees that the comparison of Rail Baltica with other projects is "relatively good and gratifying".

"There are disagreements and discussions, but we find opportunities to move forward. The funding allocated so far and the work done on it go hand in hand. However, the increase in price is nothing unique to this project, as the initial costs estimates were made years ago and there have been price corrections since," said Merirands.

Meanwhile, Andris Kuznieks, acting head of the European Commission Representation in Latvia, explained to the MPs that the increase in costs was caused by the integration of the city of Riga into the project and the Kaunas-Vilnius connection, which were not initially included in the project.

At the same time, Kuznieks emphasized that the official cost of the project is still EUR 5.8 bn and that the EUR 7 bn mentioned in the audit of the European Court of Auditors has not been officially approved.

Roberts Zile (National Alliance), Member of the European Parliament, emphasized that the European Court of Auditors have analyzed the Rail Baltica project only from an economic point of view.

"If all the investments of the European Union were evaluated only from the point of view of economic returns, then the Baltic states would not receive any investments at all, because there would not enough of a return, and that all Europeans are living in a triangle between Berlin, Paris and Luxembourg," Zile said.

He also pointed out that it was not clear how the European Court of Auditors had come to the final figure of seven bn. Zile also emphasized that the cargo flow on the Via Baltica Highway already several years ago amounted to 20 mln tons per year, thus, by reorienting the cargo to the railway, the necessary cargo flow will be ensured.

"All project participants believe that it is realistic to implement the project by 2026. The European Court of Auditors also points out that the project is not particularly endangered and can be completed by 2030," Zile added.

Rail Baltica is a double track, European standard 1,435 mm gauge electrified railway for passenger and freight transport to be built from Tallinn to the Lithuanian-Polish border. The overall length of the railway will be 870 kilometers.

The initial cost of the project was estimated at EUR 5.8 bn, with a portion of the costs being financed through EU funds. The project was expected to be completed and open for traffic in 2026.


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