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Not in Europe, but in Montreal (Canada), we've got Bixi bikes (http://en.wikipedia.org/wiki/BIXI) and it has similar issues with damage and theft. In addition to the issues mentioned in the wiki page, there were also problems with double billing... but it still seems to be doing well regardless.

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I was there recently and it didn't sound anywhere near as bad as the article. And I could see people riding the bikes everywhere

I was in Paris for a week in Spring, and rode velibs everywhere every day.

No problems at all. Occasionally you found a knackered one, but it looked like wear and tear rather than vandalism. It's a superb idea.

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