Italy Study to Show $10 Billion Rail Link to France Isn’t Viable

(Bloomberg) -- A cost benefit analysis of a $10 billion rail link between Turin and Lyon commissioned by the Italian government, will say that the project is not economically viable, according to two people familiar with the situation, scoring a win for the pro-environment Five Star Movement.

Five Star, which is part of the country’s populist government along with the rightist League, historically opposed the rail link, known as TAV, and has promised voters a review. This caused a clash with the pro-business League, which has been backing the project.

A final decision by the Infrastructure and Transport Ministry on whether works will continue on the project, is only expected at a later stage, after a review of the administrative burden to halt it. This is only the latest episode in a 10-year long saga that has pitted the business community against environmentalists.

Transport minister Danilo Toninelli said that the analysis has not been fully completed and it will first be shared with stakeholders before being made public.

Earlier this month, Italy’s Transport ministry asked Telt -- the company that is building the link and is co-owned by Italy and France -- to postpone the publication of new contract tenders until next year.

High Costs

The first high-speed trains between the industrial center of Turin and Lyon, France’s second-biggest city, are scheduled to start operating in 2030. The project is co-financed by Italy, France and the European Union, which said last month it is ready to raise its contribution to 50 percent of the overall cost.

In November, French Transport Minister Elisabeth Borne told the Italian government that it needed to make a decision on TAV by the beginning of 2019. French transport ministry declined to comment.

With extensive preparations already completed and contracts signed for additional works, walking away would cost Italy 2 billion euros, according to TAV administrators.

The review, which was done by a commission appointed by Toninelli, is the eighth cost benefit study on the project. Toninelli has repeatedly said he opposes TAV as it would damage the local community and cost too much.

Coalition Tensions

The rail-link’s future is causing tensions within Italy’s populist coalition. Halting TAV has been a crucial national and local battle for Five Star, which runs Turin’s city hall. Five Star Leader Luigi Di Maio has said the project is a waste of money.

The link is strongly opposed by a vocal local movement known as No-TAV, which has been fighting it for years, resorting to protests and even acts of sabotage to stop construction.

The League, on the other hand, has been under pressure from the business community to green light TAV with the argument that the link will boost trade between the two industrial centers of Turin and Lyon and favor local entrepreneurs.

About 30,000 people rallied in Turin last month in support of the 270 kilometer (176 mile) line, which would cut travel times between the two cities.

©2018 Bloomberg L.P.