International Journal of Railway Research, Vol.1, No1, pp 1-10 * Corresponding Author Email Address: bprofil@otenet.gr International Journal of Railway Research Challenges and Prospects of European Railways V. Profillidis * Department of Civil Engineering, Democritus Thrace University, Xanthi, Greece A B S T R A C T In the present paper, challenges and prospects of the European railways, along with a proposal for a new strategy policy and specific measures are presented. The declining course of European railways concerning traffic and revenues is first analyzed. Conditions to introduce intra-modal competition are surveyed, among them separation of infrastructure from operation as it has been applied in a mosaic form in the various European countries. Distortions in the transport market are identified and effects of an eventual internalization of external costs are quantified. A new strategy for both passenger and freight rail traffic is presented. Recent developments in the implementation of interoperability are discussed. Moreover, the effects of the debt crisis in Europe on railway costs are explored and specific measures to overcome the current critical situation are suggested. In addition, a framework to implement a more aggressive commercial and tariff policy and to assure a better quality of service is delineated. Finally, the critical question if and why we really need the railways within the present and future context is addressed. Keywords: Rail traffic, Strategy policy, European railways 1. Scope of the paper In the present paper, a global analysis of current challenges and future prospects (if any) of European railways is presented. The variety of models of structural reorganization of European railways, which constitutes a real mosaic, is first analyzed. An assessment of effects of intra-modal competition is attempted. Distortions in the transport market are examined and the consequences for railways are assessed. Benefits for the railways from an eventual internalization of external effects are quantified. As interoperability is the only efficient way to tackle technical incompatibilities among European railways concerning differences in track gauge, signaling and electrification systems, it is evaluated what has been achieved and what remains to be done. The debt crisis in Europe pushes toward drastic reductions of state subsidies; therefore, the urgency for a further reduction of railway costs is discussed. Changes in the necessary tariff and commercial policy are presented. Finally an answer to the crucial question whether and why we really need the railways is addressed. Much of the material presented in this paper comes from the analysis the author prepared on behalf of the International Union of Railways in a Strategic Planning for European Railways until 2025. [23] The future and prospects of European railways (both at European and at national level) have been explored in a number of recent publications. Sánchez- Borràs and López-Pita [18] analyze effects of rail infrastructure charging systems for high speed lines in Europe. Cantos, Pastor and Serrano [2] survey the effects of the vertical and horizontal separation in European railways on productivity, whereas Drew [4] examines the benefits for rail freight customers of vertical separation and open access. Friebel et al. [11] wonder whether restructuring the railways in Russia, Central and Eastern Europe can really constitute a solution to all problems. De Rus and Nombela [17] try to tackle the crucial question of whether investing