News
At Least One of the Engines Driving the European Economy Runs on Rails
At Least One of the Engines Driving the European Economy Runs on Rails
In Estonia, news related to railways usually makes headlines in a negative light. The focus is on the significant increase in the cost of Rail Baltica, the project’s bumpy progress, and its seemingly uncertain future. However, this is just one possible perspective. Much less is said about the significance of the railway sector in Europe as a whole, the scale of the megaproject Poland has undertaken, and the importance of railways in the defence sector.
At the end of last year, the renowned economic analysis agency Oxford Economics published a study analyzing the railway sector’s share of the European Union’s economy. The study’s conclusion is clear: the railway sector plays a pivotal role in revitalizing European industry and in achieving the Union’s competitiveness, security, and environmental goals.
The study’s findings confirm that the railway sector carries significant weight, as it directly and indirectly impacts many other economic sectors: construction, the IT sector, research and development in heavy industry, the real estate market, and local consumption. In this context, railways acts as a catalyst for economic growth. In other words, when the railway sector is doing well, the positive impact is passed on many times over to other sectors. Thus, the impact of the railway extends from construction companies to local supermarkets, where both construction workers and railway employees do their daily shopping.
In the European Union, the railway sector directly accounts for approximately 900,000 jobs. Together with related industries, this figure rises to about 3.2 million, which is more than, for example, the total employment in Ireland and accounts for 1.6% of employment in the European Union. Even when the number of jobs in air and water transport are combined, it remains below that of the railway sector. According to the study, each existing job in the railway sector is estimated to create an additional 2.6 jobs in other economic sectors, confirming the sector’s significant multiplier effect.
The railway sector’s broad-based contribution to the European Union’s GDP amounts to 247 billion euros. This accounts for approximately 1.4% of the Union’s gross domestic product and exceeds, for example, Greece’s GDP. In other words, every euro earned in the railway sector is estimated to generate an additional 2.7 euros in added value in related economic sectors.
The strategic importance of railways in the defence sector is highlighted separately. There is essentially no alternative for the large-scale and rapid transport of heavy equipment, ammunition, and personnel over land. This is also emphasized in the EU Military Mobility program, which places great emphasis on the accelerated development of a pan-European transport network, including railway infrastructure (TEN-T). The same idea is highlighted in the 2024 “Mario Draghi Report,” which identifies fast and efficient rail connectivity as a prerequisite for revitalizing and ensuring the competitiveness of European industry, including the defence industry.
The railway thus plays a key role in enabling the European defence industry to reach its desired scale. This allows the impact of defence sector investments to spill over into other economic sectors, thereby influencing the broader European economy. The strategic document “Sustainable and Smart Mobility Strategy,” which sets the direction for European transport policy, establishes a clear goal of increasing the share of rail transport and tripling railway freight volumes by 2050.
One of the key challenges for the railway sector is to develop multimodal transport solutions that are as convenient and efficient as possible. This means integrating railway transport with road and water transport into a unified logistics chain. This approach meets the growing need for flexible and environmentally sustainable logistics and is a realistic and effective way to shift freight flows from road to railway.
Currently, railway freight transport accounts for approximately 12% of the total volume in the European Union, while road transport accounts for 55% and water transport for 32%. It is important to emphasize that, in terms of environmental impact, railway transport is many times more sustainable than other means of transport. Compared to road transport, it generates approximately 80% fewer CO₂ emissions and is estimated to be seven times more energy-efficient. While road transport accounts for approximately 93% of the transport sector’s negative impacts (traffic jams, noise, and air pollution), rail transport’s share of these impacts is only about 2%.
There is therefore no reason to doubt that a functioning and well-developed railway sector plays a significant role in the European economy, influencing the performance of many other sectors. Railways are seen as a catalyst for the revitalization of European (heavy) industry and for ensuring basic competitiveness. It is precisely for this reason that the European Union supports extensive investments in the railway sector to modernize infrastructure and the network and increase its positive economic and strategic impact. Railway development should be viewed not as a burden, but as an opportunity.
Poland is emerging as a trendsetter in the European railway sector and rising to become one of its leaders. The country is purposefully creating the conditions to position itself as a European freight gateway for both east–west and north–south freight flows. All signs indicate that Poland is preparing to play a key role in Ukraine’s reconstruction as well, relying, among other things, on a strengthened and strategically developed railway infrastructure.
Poland is building a nationwide “Y-shaped” railway infrastructure that connects the country’s major cities and links them to the broader European network. The infrastructure is designed to be integrated into the Trans-European Transport Network (TEN-T) and the Baltic–Adriatic Corridor, i.e., the north-south railway connection from the Port of Gdańsk to the Adriatic Sea.
The infrastructure being built is designed for both passenger and freight transport. This is not a modernization of the existing network, but the construction of a completely new railway infrastructure based on the most modern technology. The project involves world-class international experts, and the goal is to create solutions that set new standards for both passenger and freight transport. The infrastructure is planned to be seamlessly connected to ports and airports, creating strong foundations for the development of efficient multimodal transport solutions.
One of the project’s central goals is the “Poland in 100 Minutes” concept – the ambition to develop high-speed railways in such a way that, in the future, Poland’s major cities will be separated by approximately a 100-minute train ride at speeds of up to 350 kilometers per hour.
To provide background and context, it is noteworthy that Poland’s GDP grew by approximately 3.6% in 2025, significantly exceeding the European Union average. The service sector, construction, and industry have performed particularly strongly. This clearly confirms that railway development has a significant impact on other sectors as well.
For a project of this scale, the construction volumes are exceptionally large, and in parallel, there is a need for high-level IT, financial, legal, engineering, and other professional services. Throughout the entire process, extensive and valuable know-how is accumulated, which can be successfully exported in the future. This is not merely a national infrastructure project, but an undertaking that influences the economic and strategic dynamics of all of Europe.
The northern starting point of the Baltic-Adriatic Corridor is not Tallinn, but Gdańsk. It is home to one of the Baltic Sea’s most important deep-water ports, and its strong and modern land connection further enhances the city’s strategic importance. For the Baltic states, this presents a challenging situation. A clear role and position must be established to avoid a scenario where, for the rest of Europe, “the world ends” in Gdańsk. This requires functional and competitive connections to European freight flows and determined efforts to ensure that the region is not left behind but remains a natural part of the chain.
From a security perspective, having the same track gauge as Europe is of vital importance. Competitiveness depends on offering a convenient, fast, and competitively priced service. If, at the Polish border, wheel sets must be changed on railcars due to different track gauges, this does not support speed or logistical efficiency. On the contrary, it means additional costs and reduced attractiveness for freight flows.
The Baltic states are clearly treated as a single region in Europe. Therefore, close cooperation among them is essential to ensure a smooth and competitive service. At the same time, domestic bottlenecks must also be resolved, particularly the issue of the level of railway infrastructure charges, which directly affects the price and attractiveness of transport services. Legal clarity is also essential regarding which international railway convention will serve as the basis for organizing European standard gauge rail traffic in the Baltic states (COTIF or SMGS). Transporting defence industry products by railway may become one of the most tangible goals in the near future. This would provide a real and rapid application for the new infrastructure and pave the way for broader trade.
Europe has turned its attention to railways and sees clear economic, environmental, and security potential in it. Poland is not limiting itself to strategies and visions, but is consistently putting its ambitions into practice and preparing to move large volumes of freight and passengers by railway.
Rebuilding Ukraine will require a massive amount of resources from across Europe in the coming years. The question is how likely it is that Estonia and the other Baltic states will actually be part of this process, when the journey here resembles a trip to a summer cottage on the outskirts, where the last kilometer must be covered on foot because there simply isn’t a proper road. We must hurry so as not to miss the train.
Mart Kägu, attorney at RASK Attorneys-at-Law
At the end of last year, the renowned economic analysis agency Oxford Economics published a study analyzing the railway sector’s share of the European Union’s economy. The study’s conclusion is clear: the railway sector plays a pivotal role in revitalizing European industry and in achieving the Union’s competitiveness, security, and environmental goals.
The railway sector’s footprint in the European economy
The study’s findings confirm that the railway sector carries significant weight, as it directly and indirectly impacts many other economic sectors: construction, the IT sector, research and development in heavy industry, the real estate market, and local consumption. In this context, railways acts as a catalyst for economic growth. In other words, when the railway sector is doing well, the positive impact is passed on many times over to other sectors. Thus, the impact of the railway extends from construction companies to local supermarkets, where both construction workers and railway employees do their daily shopping.
In the European Union, the railway sector directly accounts for approximately 900,000 jobs. Together with related industries, this figure rises to about 3.2 million, which is more than, for example, the total employment in Ireland and accounts for 1.6% of employment in the European Union. Even when the number of jobs in air and water transport are combined, it remains below that of the railway sector. According to the study, each existing job in the railway sector is estimated to create an additional 2.6 jobs in other economic sectors, confirming the sector’s significant multiplier effect.
The railway sector’s broad-based contribution to the European Union’s GDP amounts to 247 billion euros. This accounts for approximately 1.4% of the Union’s gross domestic product and exceeds, for example, Greece’s GDP. In other words, every euro earned in the railway sector is estimated to generate an additional 2.7 euros in added value in related economic sectors.
The strategic importance of railways in the defence sector is highlighted separately. There is essentially no alternative for the large-scale and rapid transport of heavy equipment, ammunition, and personnel over land. This is also emphasized in the EU Military Mobility program, which places great emphasis on the accelerated development of a pan-European transport network, including railway infrastructure (TEN-T). The same idea is highlighted in the 2024 “Mario Draghi Report,” which identifies fast and efficient rail connectivity as a prerequisite for revitalizing and ensuring the competitiveness of European industry, including the defence industry.
The railway thus plays a key role in enabling the European defence industry to reach its desired scale. This allows the impact of defence sector investments to spill over into other economic sectors, thereby influencing the broader European economy. The strategic document “Sustainable and Smart Mobility Strategy,” which sets the direction for European transport policy, establishes a clear goal of increasing the share of rail transport and tripling railway freight volumes by 2050.
Balance between railway, road, and water transport
One of the key challenges for the railway sector is to develop multimodal transport solutions that are as convenient and efficient as possible. This means integrating railway transport with road and water transport into a unified logistics chain. This approach meets the growing need for flexible and environmentally sustainable logistics and is a realistic and effective way to shift freight flows from road to railway.
Currently, railway freight transport accounts for approximately 12% of the total volume in the European Union, while road transport accounts for 55% and water transport for 32%. It is important to emphasize that, in terms of environmental impact, railway transport is many times more sustainable than other means of transport. Compared to road transport, it generates approximately 80% fewer CO₂ emissions and is estimated to be seven times more energy-efficient. While road transport accounts for approximately 93% of the transport sector’s negative impacts (traffic jams, noise, and air pollution), rail transport’s share of these impacts is only about 2%.
There is therefore no reason to doubt that a functioning and well-developed railway sector plays a significant role in the European economy, influencing the performance of many other sectors. Railways are seen as a catalyst for the revitalization of European (heavy) industry and for ensuring basic competitiveness. It is precisely for this reason that the European Union supports extensive investments in the railway sector to modernize infrastructure and the network and increase its positive economic and strategic impact. Railway development should be viewed not as a burden, but as an opportunity.
Something big is happening in Poland
Poland is emerging as a trendsetter in the European railway sector and rising to become one of its leaders. The country is purposefully creating the conditions to position itself as a European freight gateway for both east–west and north–south freight flows. All signs indicate that Poland is preparing to play a key role in Ukraine’s reconstruction as well, relying, among other things, on a strengthened and strategically developed railway infrastructure.
Poland is building a nationwide “Y-shaped” railway infrastructure that connects the country’s major cities and links them to the broader European network. The infrastructure is designed to be integrated into the Trans-European Transport Network (TEN-T) and the Baltic–Adriatic Corridor, i.e., the north-south railway connection from the Port of Gdańsk to the Adriatic Sea.
The infrastructure being built is designed for both passenger and freight transport. This is not a modernization of the existing network, but the construction of a completely new railway infrastructure based on the most modern technology. The project involves world-class international experts, and the goal is to create solutions that set new standards for both passenger and freight transport. The infrastructure is planned to be seamlessly connected to ports and airports, creating strong foundations for the development of efficient multimodal transport solutions.
One of the project’s central goals is the “Poland in 100 Minutes” concept – the ambition to develop high-speed railways in such a way that, in the future, Poland’s major cities will be separated by approximately a 100-minute train ride at speeds of up to 350 kilometers per hour.
To provide background and context, it is noteworthy that Poland’s GDP grew by approximately 3.6% in 2025, significantly exceeding the European Union average. The service sector, construction, and industry have performed particularly strongly. This clearly confirms that railway development has a significant impact on other sectors as well.
For a project of this scale, the construction volumes are exceptionally large, and in parallel, there is a need for high-level IT, financial, legal, engineering, and other professional services. Throughout the entire process, extensive and valuable know-how is accumulated, which can be successfully exported in the future. This is not merely a national infrastructure project, but an undertaking that influences the economic and strategic dynamics of all of Europe.
The Baltic States and the Baltic–Adriatic Corridor
The northern starting point of the Baltic-Adriatic Corridor is not Tallinn, but Gdańsk. It is home to one of the Baltic Sea’s most important deep-water ports, and its strong and modern land connection further enhances the city’s strategic importance. For the Baltic states, this presents a challenging situation. A clear role and position must be established to avoid a scenario where, for the rest of Europe, “the world ends” in Gdańsk. This requires functional and competitive connections to European freight flows and determined efforts to ensure that the region is not left behind but remains a natural part of the chain.
From a security perspective, having the same track gauge as Europe is of vital importance. Competitiveness depends on offering a convenient, fast, and competitively priced service. If, at the Polish border, wheel sets must be changed on railcars due to different track gauges, this does not support speed or logistical efficiency. On the contrary, it means additional costs and reduced attractiveness for freight flows.
The Baltic states are clearly treated as a single region in Europe. Therefore, close cooperation among them is essential to ensure a smooth and competitive service. At the same time, domestic bottlenecks must also be resolved, particularly the issue of the level of railway infrastructure charges, which directly affects the price and attractiveness of transport services. Legal clarity is also essential regarding which international railway convention will serve as the basis for organizing European standard gauge rail traffic in the Baltic states (COTIF or SMGS). Transporting defence industry products by railway may become one of the most tangible goals in the near future. This would provide a real and rapid application for the new infrastructure and pave the way for broader trade.
Europe has turned its attention to railways and sees clear economic, environmental, and security potential in it. Poland is not limiting itself to strategies and visions, but is consistently putting its ambitions into practice and preparing to move large volumes of freight and passengers by railway.
Rebuilding Ukraine will require a massive amount of resources from across Europe in the coming years. The question is how likely it is that Estonia and the other Baltic states will actually be part of this process, when the journey here resembles a trip to a summer cottage on the outskirts, where the last kilometer must be covered on foot because there simply isn’t a proper road. We must hurry so as not to miss the train.
Mart Kägu, attorney at RASK Attorneys-at-Law