These guidelines are intended to give guidance on the compatibility of State aid to railway undertakings with the EC Treaty. A safe and clean mode of transport, rail is also an industry that is undergoing liberalisation; facing tough competition from other transport modes, it is presenting some specific challenges as well in the context of EU State aid law. With this document, which pays due account to the specific features of rail while ensuring convergence of the sectoral rules with the general rules on State aid, the Commission wants to help promote the liberalisation of the sector, improving its competitiveness and capitalising on its strengths, especially from the environmental angle. The guidelines complement the 'PSO Regulation',[1] which deals in particular with aid in the form of compensation for discharging public service obligations.

The text adopted today will henceforward make it possible, under certain conditions, to grant regional aid for the purchase and renewal of passenger rolling stock. The Commission is thus lifting a prohibition contained in the regional aid guidelines. It will be possible to put such aid towards the modernisation of rail transport, which is urgently required, especially in the new Member States, both in the passengers' interest and in that of 'greener mobility'. Wishing to promote sustainable mobility, the Commission is also extending this approach to public transport by road and says it will look into the possibility of giving specific support to the least polluting technologies.

The guidelines also specify the conditions for applying Article 73 of the EC Treaty, which provides that aid which meets the needs of coordination of transport is compatible with the common market. It will be possible to apply that article directly for authorising certain State aid once the PSO Regulation has entered into force in 2009. In the interests of transparency and legal certainty, the Commission is thus presenting the methodology it will be using to assess the compatibility of aid intended to iron out differences in infrastructure costs or external costs compared with those of other transport modes, to promote interoperability, to improve safety, to reduce noise or to encourage research.

These guidelines at the same time indicate to Member States how to reconcile with the Treaty's State aid rules the requirement imposed on them by Community legislation to assume the debts of railway undertakings in order to allow them to rectify their financial situation.

The Commission is in addition adapting the rules on restructuring firms in difficulty to be able to respond to situations where the freight division of a railway undertaking has serious economic problems but cannot be restructured by the railway undertaking as a whole. The Commission says that for a transitional period up to 1 January 2010 it is willing to derogate from certain aspects of the horizontal rules to take into account the specific situation of rail freight. It is thus providing for more favourable arrangements to encourage the restructuring of freight operations, which are nevertheless obliged to ensure that their activities are kept legally separate from the rest of the railway undertaking.

Finally, the Commission draws attention once again to the general criteria applicable to the public funding of infrastructure, and stresses that apart from the explicit derogations provided for in the guidelines, the competition rules have to be applied to the rail sector as to all the other sectors. This is particularly the case as regards the unlimited State guarantees still given to certain railway undertakings. The Commission recalls that these guarantees constitute State aid which is incompatible with the EC Treaty and therefore has to be dismantled within two years at most.