The contract to run rail services in Ireland should be put out to international tender, the European Commission has proposed, a move that could have serious ramifications for Iarnród Éireann.

The Government is strongly resisting the idea, amid concerns it could cause major financial and industrial relations problems for the State.

Iarnród Éireann’s 10-year contract to run Ireland’s rail services is up for renewal in 2019. The contract is typically awarded to the State-owned body Iarnród Éireann, but the European Commission is arguing the Irish transport sector needs to liberalise further.

Iarnród Éireann operates all rail services in the country, although the Luas tram system is operated by French company Veolia.

The proposal forms part of the European Commission’s so-called “Fourth Railway Package”, which plans to establish a single railway area across Europe and open up rail markets to competition.

Discussions between Irish officials and the European Commission have been taking place in Brussels over the past few months, as Ireland seeks to secure an exemption from the rule.

It is understood the Government is arguing that the size of the Irish market, representing less than half a per cent of the overall EU railway sector, means Ireland should secure a derogation.

A number of other member states, including Luxembourg – which currently holds the EU’s six-month rotating presidency – and a cluster of east European countries, support the Irish stance.

One compromise proposal is that the Government would be permitted to award the contract to Iarnród Éireann, but the company would be subject to “key performance indicators” to be monitored by an independent regulator.

While Ireland and other small countries argue the regulator should be based in the member state concerned, the European Commission favours the establishment of an EU-wide regulator.

Significant Impact

Fine Gael MEP Deirdre Clune, who sits on the European Parliament’s transport committee, said the move to create a single European rail system could have a significant impact on Ireland.

“I have serious concerns about the impact the fourth railway package will have on Ireland and Irish Rail. It’s an issue we need to keep on top of. Even if some form of immediate exemption from competitive tendering is given to Ireland, the European Commission will be looking to liberalise our rail market at some stage.”

A spokeswoman for the Department of Transport said Ireland is concerned about the proposal, but noted the discussions were still ongoing at an EU level.

European Commission sources said that while it was prepared to compromise, it did not support the idea smaller markets should get special treatment, arguing such a move would discriminate against certain member states.

A commission spokesman also said this would fail to address “the urgent need of improvement of the quality and efficiency of public rail transport in many small member states”.

Iarnród Éireann, which suffered during the downturn from a combination of falling passenger numbers, a cut in the subvention payment and high fuel prices, introduced a cost-saving programme including pay cuts for staff last year. The company has debts of about €150 million.