The compromise sets a 24.9 percent ceiling for the sell-off of a stake of a holding comprising Deutsche Bahn's logistics, rail cargo and passenger train operations. Previously, a 49.9 percent stake in the holding was to be opened up to investors. A second holding comprising the company's rail network and train stations will remain state-owned, unchanged from previous plans.

The compromise was brokered by Beck on April 14 with conservative bloc CDU/CSU. The two parties form Germany's federal government.

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Social Democrats back German railway privatization

The Local: 21 Apr 08

Germany's center-left Social Democrats agreed on Monday to a partial privatization of the country's national railway operator Deutsche Bahn.

Party leaders approved a plan to transform the Deutsche Bahn into a publicly owned holding company with no more than 24.9 percent participation from private investors. Seventy-seven SPD members of the leadership council voted in favour of the proposal, 22 were opposed and two abstained. Backing for the plan was unexpectedly high, with anticipated fierce opposition from the party's left largely failing to materialize amid calls to support SPD chairman Kurt Beck.

Social Democratic approval was an important step toward rail privatization, a major goal for German Chancellor Angela Merkel and her conservative Christian Democrats. The two parties, partners in Germany's ruling coalition, will meet in committee on April 28 to hammer out the details between their two plans.

"The Social Democratic position is clear. Now the ball is in the Christian Democrats' court," Secretary General Hubertus Heil said.

German Transport Minister Wolfgang Tiefensee, also a Social Democrat, said he was "very satisfied" with Monday's agreement.

The rail infrastructure - including train stations and 34,000 kilometres (21,127 miles) of track - would remain in public hands under the Social Democratic plan, developed in a policy group led by SPD chief Beck. But private companies could invest in subsidiaries to run freight and passenger traffic.

Merkel's Christian Democrats criticized the proposal for limiting private participation to 24.9 percent - a ceiling Heil and other Social Democrat leaders called 'non-negotiable' while they remain in the junior partner in Merkel's governing coalition.

Christian Democratic parliamentary group leader Volker Kauder called the 24.9-percent figure "an initial step" in an interview with public broadcaster ARD, saying that to allow up to 49 percent private investment would be more appropriate.

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German railway privatization clears another hurdle

Monsters & Critics: Apr 21, 2008

Berlin - The privatization of Germany's railway company, Deutsche Bahn AG, cleared another major hurdle Monday after Social Democratic Party (SPD) leaders agreed to a controversial plan to sell-off shares in Europe's biggest rail group.

The move by the SPD national executive to sign off on party chief Kurt Beck's proposal to allow private investors to buy up to 24.9 per cent of Deutsche Bahn's passenger and logistics operations came despite stiff opposition from the SPD's influential leftwing faction.

'The 24.9 per cent is not negotiable,' said SPD general secretary Hubertus Heil following the executive's meeting in Berlin, ruling out a special party conference to consider the rail privatization and insisting that Monday's vote brought to an end the party debate about the sell-off.

While Berlin's popular SPD mayor Klaus Wowereit has rejected the planned sell-off of shares in the railway company in the run-up to Monday's meeting, the party's Bavarian branch has called for more debate on the implications on the privatization.

Party officials said that while 77 members of the SPD executive voted for the privatization plan, 25 voted against it and two abstained.

Analysts say the planned partial privatization should generate about six billion euros (9.5 billion dollars) with Heil stressing the SPD saw the sell-off as helping to mobilize capital for the railway.

Chancellor Angela Merkel's Christian Democrat-led conservative bloc has signalled support for the privatization plan drawn up the SPD, which is the junior member of Merkel's ruling coalition.

This is despite the compromise unveiled last week by Beck falling short of the 49.9 per cent that Merkel and her supporters have argued for.

Coalition leaders are due to meet next Monday to hammer out details of the privatization with Deutsche Bahn chief Hartmut Medhorn hoping that the partial sell-off of the Berlin-based rail company will launched later this year.

However, with the SPD having announced its rail privatization model, Heil challenged Merkel's party to set out details of how it envisages the railway company should be sold off.

While welcoming the Beck plan, senior members of Merkel's party have indicated that they see it as representing possibly the sale of the first tranche of shares in the railway company.

But the SPD executive rejected Monday any plans to sell off the stock in Deutsche Bahn as part of a so-called people's share action.

The party sees the shares being sold to both private investors and institutional investors.

Analysts have criticised the SPD privatization model as resulting in only a small parcel of shares being sold off. This could result in the stock ended up principally in the hands of big institutional investors, some analysts say.

Under the SPD plan, the state would have a 75.1-per-cent stake of Deutsche Bahn's passenger and freight operations, which together includes about 140,000 employees.

However, the partial privatization means that Berlin would retain a 100-per-cent control of the rail company's railway stations as well as its 34,000 kilometres of track network and energy supplier operations.