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Spain's obsession with high-speed trains runs into budget reality

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(Globalpost/GlobalPost)

By Julien Toyer

ONBOARD MADRID-ALICANTE HIGH-SPEED TRAIN (Reuters) - A one-track dirt road used by local farmers is the main access to a magnificent glass-and-steel train station in the small city of Villena, on Spain's latest high-speed rail route.

It is a spanking new 4,500 square meter building - essentially in the middle of nowhere.

The central government financed the rail route, inaugurated on Monday, between Madrid and Alicante on the Costa Blanca. The Valencia regional government was supposed to fund works to connect it to the nearby motorway and Villena, home to 35,000.

But it ran out of money, leaving the station high and dry.

The disconnect says a lot about both Spain and its current finances, about a love affair with grand projects to showcase its modernity and a diminishing ability to pay for them.

The Valencia government has pledged to complete the works but it is now not clear when and where it will be able to find the funds as it is already cutting spending on schools and hospitals as it tries to reduce a deficit.

Ximo Puig, the head of the Socialist opposition in Valencia, says the station is likely to become yet another white elephant in a country where dozens of airports, train stations, motorways or cultural centers built during a decade-long property boom are under-used or have been abandoned.

"The new route was a much needed infrastructure but there was a lot of improvisation and a complete lack of planning and it could all come to nothing, starting with Villena," he told Reuters in a telephone interview on Monday.

Spain has been in and out of recession since its credit-driven expansion ended abruptly in 2008, pushing millions into unemployment and putting the country on the brink of requesting an international bailout.

In order to meet tough Europe-agreed deficit targets, Spain has pledged to reform its administration, its public pensions scheme, its tax system and its energy sector among a list of close to 100 reforms it committed to implement by 2015.

One thing it will not cut, however, is its plan to add more fast trains - called AVE, the initials for high-speed in Spanish and also meaning "bird" - to what is already the second-biggest high-speed network in the world after China.

MORE TRAINS

Far from scaling down the previous Socialist government's plans, the center-right administration of Prime Minister Mariano Rajoy intends to invest more than 25 billion euros over the next decade to almost double the existing 3,100-kilometers network to reach regions such as the Basque Country, Galicia or Murcia.

Rajoy, who rode the debut train service from Madrid to Alicante on Monday with Spain's Prince Felipe, said in a speech in Alicante that building AVE trains would remain a priority.

"Despite our budget woes, one of the objectives of the government is to stimulate investments that are truly productive so that they'll contribute to the shared objective of the government and the society: the economic recovery and job creation," he said.

Although Spain's train system as a whole loses money, most of its high-speed lines break even. However Spain earlier this month cut service on 41 routes, including some AVE lines, praised for their comfort and reliability but expensive to maintain.

Spain's government is drafting a law to reform the railway system and make it more sustainable.

On many routes, Spanish cities lack the critical size to make the system sustainable, partly explaining why the state-owned Renfe train operator and Adif station and rail company are losing money.

Renfe has a 5 billion-euro debt while Adif, rated as junk by Moody's investors service, has debt of more than 11 billion euros.

SPANIARDS ENTHUSIASM

The government aimed to avoid repeating previous mistakes on the Madrid-Alicante line by using second-hand trains and reducing the number of daily train journeys. But the 2-billion-euro project may struggle for profitability.

The biggest town on the route is Albacete with only 170,000 inhabitants and the cost of a ticket for a return trip between Madrid and Alicante on the coast - 125 euros - will be unaffordable for most Spaniards.

The official projection for passenger capacity on the route was raised by 40 percent to put it at 2.2 million people every year, twice the number of people who used the 50-minutes-slower existing train service in 2012.

AVE believers say that Spain's obsession for high-speed trains has helped Adif winning majors contracts abroad such as the one to build a high-speed train to Mecca in Saudi Arabia. It now plans to compete for other projects in Brazil and Russia.

But on board the opening train and at the unfinished stations along the route, there was little enthusiasm.

In Alicante, about 200 people staged a demonstration against the new infrastructure and no more than 50 people welcome the new train at the Villena station.

(Editing by Fiona Ortiz)

http://www.globalpost.com/dispatch/news/thomson-reuters/130617/spains-obsession-high-speed-trains-runs-budget-reality