EC: Sell Freight Services or we won't allow state help for BDZ

The sell of Freight Services is the only way BDZ will be allowed to use state assistance for its reconstruction, revealed a confidential copy obtained by Klassa.bg of the European Commission's decision to launch a probe into state subsidies for the company. According to the document, signed by the EC Vice-President Joaquin Almunia, contrary to what Bulgarian policymakers assert, any government funding for Holding BDZ is equivalent to assistance for its subsidiaries for passenger and freight transport. While the Commission is uncertain as to whether state aid for Passenger Services would distort competition in the sector, it is adamant that supporting Freight Services is inconceivable given the country's sufficient number of private railway operators with a substantial market share.

The EC has rejected most of the measures the company is willing to take to contribute to its own reconstruction, essentially leaving privatisation as the only option. EU officials say that a potential loan from the World Bank cannot be treated as such participation since the beneficiary wouldn't be BDZ but the state. This explains the sudden refusal of Simeon Djankov, Minister of Finance, to apply for credit.

Bulgarian officials have put forward an idea to deposit the money from the World Bank loan in a domestic private bank which offers lower interest rates. An attempt to present the interest rate difference as deductible was also dismissed by Brussels.

The EC says BDZ's contribution to the restructuring process must be no less than 50%, which means that the company has to raise at least BGN 623 mln by 2016.

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