Greece's Hellenic Railway woes

Hellenic Railways

Greece has had its share of economic troubles but it appears that its rail system is adding to mounting costs. Losses at Hellenic Railways are currently mounting at a rate of three million euros (US$3.8 million) a day, making its total debt US$13 billion, equivalent to about five percent of Greece's gross domestic product.

It could have all been so different. In 2009, bankers for Goldman Sachs and Morgan Stanley offered the Greek government a solution which would have seen a major overhaul of the system. It would have seen the laying off of half of the 7,000 rail workers and made the government take on roughly half of the company's eight billion euros in debt.

However in an election year, this plan was dismissed as the government was already struggling with debt. However now, with Greece's financial rescue being shouldered by the International Monetary Fund, a solution is being demanded by the EU.

Billions in debt

The debt of Hellenic Railways, as well as the off-balance-sheet obligations of other state-owned enterprises is rumoured to be around US$33.6 billion and it is a total that would add another 11 percentage points to Greece's current debt level of about 120 percent of gross domestic product.

So what is the solution to cut costs?

An article in the New York Times theorises that shutting down the majority of routes in mountainous regions such as the Peloponnese region, where trains manned by drivers being paid as much as US$130,000 a year frequently run empty, would save masses of money per annumm.

There are also proposals to sell a 49 percent stake of the railway to the French, however the French rail network has its own problems with debt and is unlikely to be able to take on Hellenic's liabilities.

According to the latest annual figures available, Hellenic Railways reported a loss of more than US$1 billion in 2008, on sales of about US$253 million. Despite investment totalling US$3.2 billion since 1997, the system has not stopped hemorrhaging money.

It is does help that the rail network appears to be unpopular in the country with delays common. However, the general secretary for the Greek Transport Ministry, believes that the government's plan to close at least 35 loss-making routes and cut 2,500 jobs (1,000 via mandatory retirement, with the rest being moved to other government jobs) will make Hellenic Railways attractive to foreign investors. Only time will tell if this is the case though.

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