According to him, the most important decision to be made now is related to the project’s financing and implementation within a reasonable timeframe.
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“Yes, it is a difficult decision because mistakes made must be acknowledged. However, there is no other way but to clearly state: we will complete Rail Baltica no later than 2035, committing to do everything to make it happen sooner. This would allow Latvia’s total funding to be spread over eight years instead of concentrated in four years, which the budget cannot afford,” he said.
He also noted that such a decision would provide reasonable deadlines for suppliers, as currently no one is ready to undertake the project implementation by 2030 or demands disproportionately high prices for it.
According to M. Paegle, it would also provide real opportunities to implement a public-private partnership project on the main route’s northern section.
According to the chairman of the RB Rail supervisory board, given the current pace of decision-making in the government and progress, completing Rail Baltica in Latvia by 2030 is impossible even theoretically. “Every day Latvia fails to make important decisions prolongs deadlines and increases the project’s cost,” he emphasizes.
M. Paegle also believes that it is necessary to use the European Union (EU) financial instrument SAFE to implement the project. “Latvia has already left on the table a 2.2 billion euro loan for 45 years with a 10-year repayment deferral, starting repayment from 2036. Practically, we are the first EU country to refuse such conditions. With these funds, half of the main route could be completed,” he stressed.
According to M. Paegle, later this money will still have to be borrowed, but under much worse conditions and for a much larger amount, as delays will increase the project’s cost by about 200 million euros per year.
Moreover, he believes that the management of a project of this scale should be directly subordinate to the prime minister, who should also take responsibility for financing. Currently, the Ministry of Transport is responsible for the project, and the Ministry of Finance does not allocate funds for the project, while the prime minister does not want to know about it.
“The risk of further delays is extremely high. We risk losing already allocated grants or part of them. We risk receiving less funding in the next EU multiannual financial framework. Why allocate more to those who cannot use what has already been allocated?” said M. Paegle.
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He emphasizes that Latvia is losing reputation and trust in the eyes of partners, and due to delays, the project becomes more expensive because of inflation. Meanwhile, the expected social and economic benefits for the country and its residents are postponed.
As M. Paegle points out, the new Latvian government should think not only about how to reduce costs but also about how to contribute to the security of the Baltic region and the growth of Latvia’s economy, as well as regain the respect of partners and neighboring countries.
As previously reported, the cost of the first phase of the Rail Baltica project in the Baltic states may reach 14.3 billion euros, of which 5.5 billion euros in Latvia, but considering inflation, this amount may increase to 6 billion euros.
The total project costs in the Baltic states, based on cost-benefit analysis, may reach 23.8 billion euros. The earlier 2017 cost-benefit analysis predicted total project costs of 5.8 billion euros.
Rail Baltica will connect Tallinn, Pärnu, Riga, Panevėžys, Kaunas, Vilnius, and Warsaw, with this section in Lithuania extending 392 kilometers.
The project is included in the EU’s Northern Military Mobility Corridor. According to EU law, core trans-European transport network projects must be implemented by 2030, and the entire network by 2050. The line from Tallinn through Riga, Pärnu, Panevėžys, and Kaunas to Warsaw must be operational no later than 2030.
However, the European Court of Auditors stated in January that the Rail Baltica project will not be completed by 2030 as previously planned, and there is no final implementation deadline at all.
