France Says Future of Rail Freight at Risk in EU State-Aid Talks

(Bloomberg) -- The French government is in talks with the European Commission to avoid reimbursing some €5.3 billion ($5.7 billion) of state aid received by the country’s rail freight operator.

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The survival of SNCF Fret is at stake, Transport Minister Clement Beaune said in an interview with Les Echos newspaper published on Tuesday after he met with labor unions and management at the freight branch of state-owned rail operator SNCF.

“I think we’ll reach an agreement,” he said, adding that he has set red lines: No redundancies, no shift to road haulage, and no privatization.

“If we put in place an organization that respects these red lines and which leads to ceasing certain operations, we won’t have to reimburse anything,” he told the newspaper. “Paying back this aid would kill Fret SNCF, and presumably rail freight in France.”

The government is aiming to maintain a single public freight entity controlled by SNCF.

In January, the commission said it would investigate state aid given by France between 2007 and 2019 to the freight unit of SNCF. In principle, such support is banned in the EU under competition rules unless it falls under specific exemptions.

Despite recent pushes to lower carbon emissions, rail freight transport has declined by 43% since 2000 in favor of truck transport, according to the French government. SNCF Fret employs some 5,000 people and handles about half of train transportation of goods, according to Beaune’s office.

The minister also said the government will increase support for rail freight to €200 million a year from 2025 from €170 currently in a bid to maintain a target to double the share of train freight from 9% in 2019.

The commission could make a decision by the end of the year, according to an official in Beaune’s office, who asked not to be identified to comply with government rules. If SNCF Fret has to reimburse the sum, the company will enter liquidation, the official said.

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