The European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) are extending loans of, respectively, ECU 60 million (US$ 64 million)(1) and ECU 40 million (US$ 42.7 million) to assist in the modernisation of Hungary's railways. In addition, EU-PHARE is providing grant aid for environmental, safety and efficiency improvement, and technical co-operation for management development.

Wolfgang Roth, Vice President of the EIB, said: "Upgrading the Hungarian railways is crucial for the economic development of the country and its integration into the European Union. The EIB will most certainly provide further support for future works in this area. It has recently set up an ECU 3.5 billion (US$ 3.7 billion) pre-accession lending facility for ten Central and Eastern European countries and Cyprus doubling to ECU 7 billion (US$ 7.4 billion) its lending over the 1997-2000 period in these countries, one of the main objectives being to promote the adoption of EU standards and "acquis communautaire".

"A key objective of the modernisation programme is to improve the efficiency and commercial management of MÁV (Hungarian national railway), which carries nearly one-third of Hungary's freight traffic and a quarter of its passengers," said Charles Frank, Acting President of the EBRD. "As Hungary moves towards accession to the European Union, a modernised railway infrastructure will enable the country to increase its competitive position in Europe."

The EIB has approved up to ECU 120 million for the modernisation of the Hungarian railway of which a first loan of ECU 60 million is made available today. It will finance the upgrading of 340 km of rail track on four lines which form part of the core network on the priority international corridors Dresden-Budapest-Bucharest/Sofia and Trieste-Budapest-Lvov. In addition, obsolete equipment will be replaced and other equipment modernised across the 7,600 km national network. Investments will help maintain rail freight and passenger traffic - and therefore reduce environmental pollution, nuisances and accidents; they will also improve safety and reliability for passengers as well as service.

The EBRD's ECU 40 million loan will finance the refurbishment of approximately 235 passenger coaches and the upgrading of up to 250 freight wagons. This will reduce operating and maintenance costs, improve the quality of service and increase the levels of cost recovery. International trade will also be facilitated as the freight wagons will be compatible with the Western European network. In addition, the EBRD loan will enable MÁV to introduce an automated ticketing system and a computerised freight accounting system to replace outdated manual systems. This will also help to reduce costs, improve cost recovery and provide better market data to match services to customer demand.

The high level of co-operation between the EBRD, the EIB and EU-PHARE in developing this programme has paved the way for future collaboration in addressing other infrastructure needs in central and eastern Europe. In Hungary, both the EIB and the EBRD have committed around ECU 1 billion each in financing.

Established in 1958, the EIB is the European Union's financing institution. Since 1990, the EIB has made its finance available in 11 Central and Eastern European countries where its total lending has reached ECU 6.3 billion so far. EIB lending supports among others, investments to improve national networks and external communication links with the EU; over ECU 800 million has been lent to major railway investments in the Czech republic, Estonia, Lithuania, Poland, and Slovenia.The EBRD was set up in 1991 to aid the transition from centrally planned to democratic market-oriented economies in 26 countries of central and eastern Europe, Russia and central Asia. The EBRD, with ECU 20 billion in capital, is owned by 60 shareholders: 58 countries, the European Investment Bank and the European Community.

(1) On 31 December 1997, 1 ECU = DEM 1.98; USD 1.10; GBP 0.67; HUF 224.71.