Germany's railway reset: Can Berlin break Deutsche Bahn's downward spiral?

Deutsche Bahn's problems run deeper than operational hiccups. The company reports EUR 33 billion in accumulated debt while posting billion-euro operating losses. Infrastructure maintenance faces an estimated EUR 90 billion backlog, causing widespread delays across the network.

Punctuality for long-distance trains stands at 62.5%, compared to Switzerland's SBB at 93.2% and Netherlands' NS at 89%. The contrast becomes more pronounced in overall performance: while other European systems improve, DB delivers its worst punctuality in over two decades.

The timing adds urgency. With the new CDU-SPD coalition under Chancellor Friedrich Merz having taken office in May 2025, Berlin faces pressure to reform its railway. The Green Deal demands doubling rail freight by 2030, yet Germany's rail modal share stagnates while road transport gains ground.

Learning from European peers

Other European railways demonstrate alternative paths. SNCF underwent debt restructuring starting in 2020, with the French state absorbing EUR 35 billion over two tranches to enable fresh investment. The result: sustained infrastructure funding and improving regional service quality.

Italy's Ferrovie dello Stato transformed from loss-maker to profitable operator through vertical integration and commercial focus. FS now expands internationally, operating high-speed services in Spain and France while DB retreats to core markets.

Switzerland's approach offers the starkest contrast. Through consistent annual funding of CHF 5 billion and strict performance contracts, SBB achieves world-leading punctuality despite dense traffic and challenging topography. The Swiss model separates infrastructure ownership from operations while maintaining integrated planning—exactly what German reformers propose.

The infrastructure investment blueprint

Minister Schnieder's upcoming "Agenda for Satisfied Rail Customers" builds on the EUR 40 billion infrastructure program announced in 2023 and the S3 restructuring plan presented in September 2024:

Infrastructure investment surge: The program focuses EUR 40 billion over seven years on critical bottlenecks. The Rhine Valley line alone needs EUR 4 billion for capacity expansion. Digital signaling (ETCS) requires an estimated EUR 28-69 billion nationwide but could increase capacity by 30%.

Structural separation: Following EU's Fourth Railway Package principles, DB Netz (infrastructure) would gain independence from DB's operating divisions. This mirrors ProRail in Netherlands—a model delivering consistent performance through clear accountability structures.

Performance-based governance: Customer satisfaction metrics would determine executive compensation and state funding. Austrian Federal Railways (ÖBB) uses similar mechanisms, achieving 96% regional train punctuality through rigorous performance management.

Debt resolution: The state may assume EUR 15-20 billion in legacy debt, following SNCF's precedent. This would reduce annual interest payments by EUR 600 million, freeing capital for fleet renewal and digitalization.

European connectivity at stake

DB's dysfunction disrupts European connectivity. The Rhine-Alpine corridor, one of Europe's busiest freight routes, depends on German infrastructure reliability. Delays at Frankfurt or Mannheim spread to Rotterdam, Milan, and Antwerp.

The Commission monitors closely. TEN-T completion requires functional German nodes by 2030. European funding allocated to German projects could be redirected if implementation capacity remains questionable.

Cross-border services suffer particularly. The Amsterdam-Basel EuroCity achieves 85% punctuality in Netherlands but drops to 45% crossing German territory. Night train operators avoid German routes despite market demand, citing infrastructure unreliability.

Financial engineering versus structural reform

Industry analysts remain skeptical about quick fixes. "Debt restructuring helps, but without governance reform, DB returns to crisis within five years," notes Maria Leenen from transport consultancy SCI Verkehr.

The company's complexity compounds challenges. DB operates 600 subsidiaries across logistics, real estate, and consulting—distracting from core rail operations. DB Schenker logistics, sold to DSV for EUR 14.3 billion in April 2025, provides funds for rail investments.

Labor relations add another dimension. The railway union EVG represents 190,000 employees with generous collective agreements. Productivity lags European peers by 20-30%, yet reforms require union cooperation.

The implementation challenge

Even well-designed strategies face execution hurdles. Germany's planning procedures average 10-15 years for major projects versus 5-7 years in Denmark or Austria. Environmental assessments, citizen participation, and federal complexity create systemic delays.

The skills gap threatens digital transformation. ETCS deployment requires thousands of specialized engineers Germany currently lacks. Competing industries offer higher salaries, draining technical talent from rail.

Political consensus remains fragile. While the CDU-SPD coalition agrees on investment needs, financing mechanisms divide partners. The SPD protects union interests while CDU pushes for efficiency gains.

International performance gaps

The scale of Germany's challenge becomes clear through international comparisons. Rail investment intensity shows Germany at EUR 198 per capita in 2024—a substantial increase from EUR 114 in 2023, but still trailing Switzerland (EUR 480), Austria (EUR 352), and Luxembourg (EUR 587).

As percentage of GDP, Germany invests approximately 0.2-0.3% annually on rail infrastructure—below the European average of 0.3% and significantly behind leaders like Great Britain (0.6%) and Switzerland (0.5%). Closing this investment gap requires sustained political commitment beyond electoral cycles.

Market dynamics and consolidation

European rail freight demonstrates the broader competitive pressures. While exact market shares vary, Germany's rail modal share faces pressure from both domestic trucking and international rail operators entering the liberalized market post-2030.

The four largest manufacturers—CRRC, Alstom, Stadler, and Siemens—control over 70% of the European market. Consolidation pressures from Chinese CRRC's state-subsidized prices force European manufacturers to seek efficiency gains that German operators currently cannot match.

Assessment: Necessary but insufficient

The forthcoming reform strategy on September 22 represents overdue recognition of DB's crisis depth. Debt relief and infrastructure investment address symptoms, while structural separation could improve accountability.

Yet international comparisons suggest deeper transformation is required. The investment gap with European leaders demands sustained commitment beyond single parliamentary terms. Without addressing planning procedures, governance complexity, and productivity gaps, Germany's railway will continue trailing its peers.

As cross-border traffic grows and climate targets tighten, incremental measures risk making DB the weakest link in Europe's sustainable transport ambitions. The EUR 40 billion infrastructure program and Schenker sale proceeds provide resources—but success depends on implementation capacity Germany has yet to demonstrate.