Plans to regulate the train company have been in the works for three years and a vote is due in the Bundesrat, upper house of parliament next week. Deutsche Bahn, which is the world's second largest transport company, oversees the country's vast rail network as well as its day-to-day train provision.
Critics say this leads to anti-competitiveness because in effect, private carriers must compete with and pay operating costs to the same company.
However, the Social Democrat opposition maintain that the proposed new regulation would not solve the problem. The party said the bill lacked transparency and posed more questions than it answered, and will kill it off in the Bundesrat, the newspaper said.
"We're most dissatisfied with the law," Frank Nägele, Schleswig-Holstein state transport secretary told the Handelsblatt, adding, "It's better to have no solution than a bad one."
EU transport commissioner Siim Kallas is likely to increase pressure on Deutsche Bahn to separate the operation of the rail network from its train services if, as is all but certain, the bill fails to pass into law in the June 26 Bundesrat vote.
The EU commission maintains that Deutsche Bahn's model may break EU law. It argues that failure to separate the parent concern financially from the subsidiary in charge of maintaining the network, gives its own carriers an unfair competitive advantage.
But Deutsche Bahn argues that its model allows it to invest up to €1 billion in rail lines annually - work which it says would otherwise be paid for by state funds.
The pro-business Free Democratic Party, Chancellor Angela Merkel's junior coalition partner, doesn't see it that way.
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The party's transport spokesman, Oliver Luksic accused the Social Democrats of submitting to lobbying from Deutsche Bahn. In relation to the growing threat of action from Brussels, he said "The next transport minister must act as a matter of urgency."