By Katya Zapletnyuk and

S. Adam Cardais

Staff Writers

If picturesque landscapes were all it took to make train travel in Europe the experience seasoned riders from around the world swoon about, the Czech Republic would be no exception. Unfortunately the majority of trains here are old, slow and dirty.

"The quality of trains and culture of railway traveling is rather low in this country," said Vít Sedmidubský, head of the transport development department at the Transport Research Center. "But improving [the quality of railway transport] costs a lot of money and is a long-term project."

However, there is hope for the country's foundering fleet. České dráhy (ČD), the government-controlled company that owns the trains, has asked the government to act as guarantor for a 1.4 billion Kč loan to upgrade its fleet. Eurofima, a supranational organization owned by European railway companies including ČD, will provide the money.

Experts claim the loan, which was approved by the government Aug. 22, will do much to revitalize the industry. The bill authorizing the loan is awaiting President Václav Klaus' signature.

"This is the cheapest money, and it also serves to support employment because all production financed by these loans takes place in the Czech Republic," said Petr Šťáhlavský, ČD's spokesman.

Eurofima's debtors pay a flat interest rate that fluctuates between 2.025 percent and 0.5 percent depending on their credit rating. ČD is not considered a risky investment, according to Martin Fleischer, head of Eurofima's capital market department.

"The country is developing quite well," he said, adding that there are a lot more investments needed for the country to be competitive.

ČD joined Eurofima in 2002. The membership entitles it to receive loans of up to 50 million euros ($40.98 million/1.48 billion Kč) per year. To date it has received 60 million euros in loans.

Public transportation

In keeping with the European Union's policy of encouraging the use of public transportation, the government is intent on increasing ridership on passenger trains. "We are interested in boosting the popularity of public transport as opposed to individual transport," Sedmidubský said. "Buses and railway transport should be two complementing parts of public transport."

Commuter trains are subsidized by the government. Last year it paid ČD 7 billion Kč for providing passenger transport.

Starting this year, however, financing was partially shifted to regional authorities who now must make deals with ČD to pay part of the cost to operate trains making local stops.

The proposed loan is also key to preventing the termination of three long-term manufacturing contracts that could cause some local players to go belly up, according to experts.

The contracts call for the purchase of several trains including 26 high-speed passenger trains from Siemens Transportation Systems, 20 high-speed locomotives from Škoda Transportation and the gradual delivery of electric trains from Ostrava-based ČKD Vagonka.

If Klaus doesn't sign the bill authorizing the loan, those contracts may be suspended or cancelled, seriously damaging the nation's industry.

"It could lead to bankruptcy of some of the companies," said Šťáhlavský.

According to statistics, the Czech train-manufacturing industry declined 11.5 percent and employment in the sector dropped 8 percent over the past few years.

A slow trip

Even though ČD owns the trains, high-speed connections are subsidized by the Transportation Ministry. Starting this year regions must foot part of the bill for trains that make local stops, though some regions are reluctant to commit money because they claim ČD failed to document the exact amount of the loss they will be expected to cover.

International trains and the single, popular Intercity fast train connecting Prague and Ostrava are ČD commercial projects and receive no support from the outside.