The railways of South East Europe andTurkey experienced significant declines in traffic volumesin 2009. This reflected the impact of the internationalfinancial crisis unleashed in the last quarter of 2008 andits contractionary impact on the economies of the region andelsewhere. Lower traffic volumes translated in most casesinto a serious deterioration of the financial performance ofthe state-owned railways. This brought home the costs offailing to implement essential reforms to improve theoperational and financial performance of the sector when theeconomy was strong. In Romania in 2010, large-scale layoffswere announced at short notice for the state rail companies.The situation is similar for the Bulgarian state railincumbents; they face an acute liquidity crisis, and willrequire additional state aid merely to keep running. Thelesson of these events is clear: it is unwise to delayimplementing state railway sector reforms during goodeconomic times, because the consequences can be too severeif a financial downturn occurs before those reforms havebeen taken and properly implemented. This report begins byassessing implementation of the European Union (EU) legaland institutional framework and the state of institutionalreform in South East Europe and Turkey. It then turns to acomparative assessment of the operational and financialperformance of the rail sector in each of the 10 countriesover 2005-2009, comparing the report countries with theEU-27 benchmark and three EU countries, Germany, Poland, andSlovenia. The report then moves on to the issue of railcorridor performance, with a specific focus on improving theinstitutional and regulatory environment at border-crossingpoints, before offering some conclusions. The first annexfocuses on the performance of the incumbent state-ownedrailways of South East Europe and Turkey in much greater detail.
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