Portugal drops high-speed Madrid-Lisbon rail link

The dream of traveling by train from Madrid to Lisbon in two hours, 45 minutes will remain as such after Portugal announced on Thursday it was abandoning the project.

The plan to build a high-speed rail link between the Iberian peninsula’s two capitals was agreed in 2003 by then-Spanish Prime Minister José María Aznar and his Portuguese counterpart José Manuel Durão Barroso, with the optimistic date for the maiden voyage set for the first quarter of 2011.

However, since then the Portuguese economy has at best muddled through — before the country last year was forced to go cap in hand to the IMF and the European Union to seek a 78-billion-euro bailout to help it through its debt-servicing problems.

In turn, Lisbon agreed to a draconian austerity drive to cut the country’s deficit, and with the economy mired in a deep recession, the government of Prime Minister Pedro Passos Coelho announced after winning elections in June of last year that it was shelving the project, which on the Portuguese side alone was to have cost at least 2.3 billion euros.

The reason for the “definitive” jettisoning of the plan was a decision by the country’s Court of Auditors, which ruled as illegal a contract signed in May 2010 by the Socialist government of José Sócrates and a consortium of companies named Elos on the construction of a 167-kilometer-long section of the planned line between Poceirão and Caia on the border with Spain at a cost of 1.4 billion euros.

The irregularities identified by the court in the contract could serve to reduce the compensation the government may have to pay for pulling out of the project. In a statement, the Economy Ministry said it “will analyze the ruling bearing in mind its legal and economic consequences with a view to defending the public good.”

After the decision by the court, Elos consortium member Soares da Costa on Wednesday filed a statement with the Portuguese Securities Commission saying that the group had already incurred expenses and costs on the project of at least 264 million euros. Other members of the group include Spanish builder ACS’s units Dragados and Iridium, and Portuguese tollroad operator Brisa.