Its ebullient new chairman, Guillaume Pepy, has announced ambitious plans. He has just written to his 160,000 employees, telling them he wants the company to become one of the top five logistic and freight transport groups in the world and the undisputed leader of high speed rail travel, and to develop an innovative public service concept for commuters.

All this suggests the dawn of a new golden era for French railways. Yet bright as the future may look, these grand plans could all be derailed if the government does not act quickly to repair a whole series of structural flaws in the current rail system.

The Cour des Comptes, the government audit office, has just exposed in a hard-hitting report how the railway reforms launched a decade ago had failed to live up to their promises and now risk seriously damaging the entire system. In short, the government of the time decided to split the railways into two separate companies – the old SNCF in charge of running the trains and the commercial side of the business; and a new company RFF in charge of the infrastructure and tracks.

In the process, it transferred the railway’s €22bn of debts to the new RFF entity rather than simply taking on the debt itself. This is what the Germans did in 1994 when the government absorbed the €35m debts of the Deutsche Bahn. But France was in the midst of its campaign to qualify for the new European single currency and the last thing it wanted was to increase indebtedness.

Thus, while the commercial SNCF business managed to move into the black, the network company has seen its losses and debts mount. RFF lost last year €800m and its debts are now topping €40bn. This is not only the result of large debt interest charges but also the cost of financing all the high-speed railway lines that are today the country’s pride and joy.

The audit office also notes that, under these huge financial constraints and the obligation to fund new high speed tracks, much of the traditional network has been degraded due to insufficient maintenance. It says 46 per cent of the network urgently needs upgrading. On large stretches of the network, trains are forced to travel at low speeds because of the state of the tracks.

The reform of the system needs to be reconsidered. First and foremost, the audit office suggests, the state should absorb a large part of RFF’s debt to unshackle the network company and let it conduct the necessary modernisation and maintenance of the tracks. It also argues for closure of low-density railway lines. And perhaps the state should reconsider the wisdom of splitting the commercial and infrastructure operations into two separate companies since the system is clearly not working in its current state. After all, this was one of the lessons learnt in the disastrous privatisation of Britain’s railways where operators were split from the tracks.

The government, struggling to fill its depleted state coffers, has clearly no intention of absorbing even a small part of RFF’s debts. Instead it is proposing to allow the infrastructure company to charge higher tariffs to SNCF and any other users. That will put pressure once again on SNCF’s finances and simply redistribute the losses of a structurally unviable system.

Free market fans

Some things will never change – and that is the French exception. At a time when most countries are losing confidence in the free market system, more and more French citizens are being converted to its merits.

This is pretty surprising given that, barely three years ago France was the only country where the majority of citizens polled by GlobeScan opposed the idea of the free market system. The majority of French still do, according to the latest poll, but their numbers are shrinking. Indeed, 5 per cent more French citizens – or 41 per cent of the population – believe free markets are best for the future of the world economy.

Turkey has emerged as the country with the greatest aversion to the free market, with only 34 per cent of those polled in favour of the system, compared with 47 per cent in 2005. Support for the free market has also fallen significantly in China (down 9 per cent), Britain (down 7 per cent) and Brazil (down 7 per cent). Elsewhere, including the US and Germany, it has also fallen but by more modest amounts.

That said, in countries such as Britain, the US and Germany, the majority still supports the free market. But in all these countries free market supporters are showing increasing enthusiasm for a strong, more regulated market system. Even more interesting, the poll was conducted just before the current banking meltdown, suggesting that the free enterprise system was already beginning to lose the trust of citizens – except, of course, in France.