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As publicity stunts go, this one could have been better timed. Throughout May and June, as waves of strikes disrupted public transport in France and forced the cancelation of hundreds of trains, the French national railroad company SNCF lugged 28 engines and carriages onto the Champs Elysées for an exhibition that promised to "put the whole of Paris under the spell of rail." The exhibits ranged from a replica of an 1829 steam locomotive to the latest version of the high-speed tgv. There were even models of the very commuter trains hardest hit by the strike, so the crowds at the show could at least admire the handsome trains they couldn't take to work.

No matter. "Even in the strikes, people are happy to go to this exhibition," said Gad Weil, one of the organizers. "The adventure of rail continues in this society. People expect a lot from trains."

Europe has nurtured idealized visions of railroads ever since the British engineer George Stephenson drove a steam engine from Stockton to Darlington — the world's first public railroad — in 1825. In theory, given the vast rail infrastructure that has been built in Europe since, traveling by train should be easy, safe and environmentally clean. The reality can be a rude shock: the 5.7 billion annual passengers on Europe's railroads encounter trains that are dirty or late when they run at all. A recent German poll found that Deutsche Bahn (DB) has by far the worst image of any company in the nation. In the U.K., almost 60% of passengers say trains don't provide value for money — and service got so bad on some of the main commuter lines into London that the government last month sacked the company that operates the franchise. In Italy, where almost one in five commuter trains is more than 10 minutes late, signs at major rail terminals have a column for what platform a train will arrive on, one for what time it's scheduled to arrive, and one labeled ritardo: how late the train will be.

That's indicative of the biggest complaint: European railroads are run haphazardly by bloated monopolies immune to the concept of service. Rail freight still only moves around Europe today at an average of 18 km/h; even George Stephenson managed to go faster on some stretches of his maiden run 178 years ago. And passengers sometimes don't do much better. Linda Bienge, a 39-year-old clerk in Berlin's criminal court, was traveling back to the German capital from Dresden one evening recently when her train came to a standstill for almost two hours. "I was fuming," she says. It took the conductors 45 minutes to apologize for the delay. But they never explained what caused it.

Every regular rail traveler has some version of that story, so it's little surprise that rail has lost out badly as a means of transportation. In the past three decades, travel by private car grew three times as fast as passenger transport by rail — leaving rail's share of journeys at just 6%. The €10 billion rail-freight business has fared even worse: its share of the European Union market has collapsed from 21% in 1970 to just 8% today. (By comparison, about 40% of freight goes by rail in the U.S.) Things have got so bad that Britain's Royal Mail last month ended 173 years of tradition by announcing that it will stop using rail altogether for transporting letters. "Quite simply, other forms of transport can give us the same benefits, in terms of flexibility and quality, but at a lower cost," said Paul Bateson, Royal Mail's managing director for logistics.

But rail's decline may not be terminal. For one thing, competition is finally being injected into the railroad system. Throughout the 1990s, the European Commission forced state railroads to split track management from management of passenger and freight services in an effort to break their stranglehold and pave the way for private rail operators. The liberalization program culminated earlier this year in a cautious first opening of the freight market to international competition. As of March 15, it became possible for private railroad operators to gain access to 50,000 km of track throughout the E.U. Several companies have already applied for licenses in countries where the system was previously closed to competition, including France. As yet, there's no comparable agreement on opening the market for passengers to competition.

Technology is also starting to make a difference. After years of planning and billions of euros of investment — E.U. governments paid out €40 billion in subsidies to their railroads in 2001 alone — a new network of high-speed train lines is finally taking shape in Western Europe. France has been the most aggressive to date: its tgv currently accounts for more than half of Europe's high-speed total. But Germany, Italy, Spain, Belgium and the Netherlands are also busy assembling a comprehensive high-speed network that will be fully in place by the end of the decade, enabling fast connections from Paris to Frankfurt or Amsterdam to Barcelona and beyond. "There's not been as much money going into the rail industry since the railroads were first built in the 19th century," says David Briginshaw, editor of the U.K.-based International Railway Journal. Some say even that's not enough: last week, the European Commission released a report suggesting that a further €235 billion should be spent on rail and other transport links throughout Europe.

Can either approach work? The French experience with high-speed trains suggests that they can win back passengers. Last year, shortly after SNCF opened its €4 billion high-speed route between Paris and Marseilles, cutting travel time from 4 hr. 20 min. to just 3 hr., traffic jumped by 67% to 18 million passengers. SNCF officials say at least 75% of TGV seats are occupied on average.

The benefits of competition in the passenger sector are murkier. The British experience has been horrendous. Britain completed the privatization of its rail system in 1997, breaking the formerly integrated network known as British Rail into more than 100 different firms. At the center was Railtrack, which had the task of maintaining the tracks, signals and stations. It contracted out the work, resulting in spiraling costs and a record of erratic maintenance that had fatal consequences, including a 1999 collision between two trains outside Paddington Station in London that killed 31 people. Criticism of the safety record was heightened by its status as a publicly-traded company that paid out dividends to shareholders. Whenever an accident took place, critics charged that the company cared more about profits than safety. Following a public outcry, Railtrack was placed in administration in October 2001 with debts of €5 billion. Says Andrew Murray, spokesman for train drivers' union a.s.l.e.f.: "Privatization has been an utter disaster for the railroad industry." Polls show most Britons agree, with a majority calling for the railroad to be renationalized. Last week, Railtrack's successor, Network Rail, disclosed that it is looking for a further 2,000 job cuts — and a whopping €78 billion in investment over the next decade — to get back on track.

Advocates of liberalization on the Continent say they'll be careful not to repeat Britain's mistakes. They look instead at Sweden. It became the first European nation to split its track operations from passenger and freight services in the late 1980s, and has seen an upturn in rail traffic and a growing number of private rail operators. They include IKEA, the big furniture company, which has set up its own rail operations between Sweden and its biggest market, Germany. But elsewhere, the official reaction to liberalization is far more skeptical. No private operators have yet been granted licenses in France or Spain, even though both nations have implemented legislation that should technically allow for it. In Germany, where some private operators have been allowed, DB's ceo, former aerospace executive Hartmut Mehdorn, is cutting staff and spiffing up stations to knock the railroad into shape before a planned public offering in 2005. He has also bulked up the company's international-freight operations with the acquisition of former state-owned firms in Denmark and the Netherlands. Some worry that DB is assembling a dominant position in Europe's freight market that will enable it to counteract the market opening. "Old monopolies don't want to lose market share," gripes Klaus-J. Meyer, who runs a Brussels-based association of private rail-freight operators. Mario Monti, the E.U.'s tough antitrust Commissioner, made it clear at a rail conference last year that he won't tolerate merely shifting the monopoly; he warned state-owned flag carriers that they "do not have blanket immunity from the competition rules."

Rolf Georg is testing to make sure. He owns a four-person firm, based in Frankfurt, that runs an overnight sleeper service between Berlin and Malmö, Sweden. When DB charged him what he says were exorbitant prices to lease one of its engines, he took the case directly to Monti in Brussels, where it's still being examined. "They need to see they can't get away with it," he says. If people like Georg can prevail, a flourishing private sector for rail could develop in Europe. The question is whether it will be enough to reverse rail's long decline — or whether that train has already left the station.

• PETER GUMBEL | Paris
• How to get Europe's dysfunctional trains back on track