Budapest - The European Commission gave conditional approval Tuesday for a consortium led by Rail Cargo Austria (RCA) to purchase MAV Cargo, the freight wing of the state-owned Hungarian railways.

The deal was a[pproved on condition RCA - a subsidiary of the Austrian state railway company OBB - sever all structural ties and review its contractual links with the only other consortium member, the small Hungarian-Austrian railway company GySEV.

The RCA-GySEV consortium won the tender for the privatisation of MAV Cargo in May last year with a bid of 102.5 billion forints (41 million euros), along with a commitment to invest a further 43.5 billion forints (174 million euros) on infrastructure over five years.

It also committed to selling 5 per cent of MAV Cargo shares to the company employees at half the market rate. A privatisation contract was signed with the Hungarian government in January.

The European Commission launched an investigation into the privatisation and merger shortly after it was announced amid concerns over competition.

Brussels was concerned that unless GySEV - which operates a small passenger and freight railway between between Hungary and Austria - remains fully independent, then RCA would have no local competition once it had taken over MAV Cargo.

The verdict from Brussels on Tuesday puts an end to a case that has dragged on since May last year, and a ruling that has been repeatedly postponed.

Meanwhile, there is no end in sight to a long running dispute over pay between MAV employees and management.

There have been several one-day rail strikes over the past year, with railway workers' unions demanding a 10 per cent pay rise and a one-off payment of HUF 250,000 for every employee from the proceeds of the sale of MAV Cargo.

The management of the heavily subsidised Hungarian state railway company last week repeated its refusal to meet these demands, and further industrial action before Christmas looks likely. (dpa)