Millions to Help Mop Up | Business| Economy and finance news from a German perspective | DW | 03.09.2002
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Millions to Help Mop Up

The German federal government has released millions of euros to help private households and businesses devastated by the country’s recent floods. Still, some say it’s not enough.


People waiting for emergency relief in the eastern Germany city of Dessau

When Federal Minister of Economics and Technology Werner Müller travelled on Sunday to the eastern German cities of Dresden and Chemnitz, he had some good news for businesses there: immediate aid up to 15,000 euro ($14,775 ) for those affected, plus additional aid covering up to 35 percent of the flood damage, up to a maximum of 50,000 euro ($49,252).

“We want to make it as unbureaucratic as possible,” said Müller as he handed a 15,000 euro check to Otto Töffels, a restaurant owner in Saxony-Anhalt whose establishment was partially destroyed by the floods.

Those are welcome words to owners of the some 2,500 businesses that are estimated to have been completely wiped out by the raging waters that swept along the Elbe and Donau rivers more than two weeks ago, sweeping away houses and livelihoods and leaving an estimated 20 billion euro (dollars) in damages behind.

“We are going to try to make emergency repairs with the 15,000 euro,” said Töffels, “and get part of the business back in operation so we can at least make a little money.”

In addition, businesses can count flood losses of up to 495,000 euro ($488,000) against their 2001 taxes and are freed from paying any additional taxes until they register a profit. The total amount of immediate aid, including federal and state sources, is expected to be in the region of 400 million euro ($394 million).

Help for Households

On Monday, Germany’s Interior Ministry announced it was releasing the first 60 million euro ($59 million) it is providing for relief to private households who suffered in Germany’s worst floods in a century. Most of that money, 36 million euro ($35 million) went to the state of Saxony, but seven other states received funds as well. Saxony-Alhalt, the second-worst affected state, received 12 million euro (dollars).

Zerstörtetes Wohnhaus in Weesenstein bei Dresden nach Hochwasser

Local administrations will pay households up to 10,000 euro.

Another 40 million euro ($39 million) from the federal government will be released as soon as finals plans are made on how to divide up the money. The total amount of interim flood relief coming for private households from federal, state and munciple levels is estimated at 200 million euro ($197 million)

Is it enough?

Despite the announcement that cash is on the way, not everyone is satisfied. Saxony’s economics minister, Martin Gilo, warned of a possible wave of bankruptcies in his state. Besides the 2,500 businesses completely wiped out, another 15,000 to 18,000 companies suffered varying degrees of flood damage.

He called the 15,000 euro relief amount an “absurd limitation” since some businesses will need hundreds of thousands of euros to get back on their feet, if not millions.

Indeed, with Dresden’s mayor comparing the damage in that city with that it suffered during the firebombing of World War Two, some are saying the floods have set parts of eastern Germany back years, or even decades.

“We might as well just begin the reconstruction from the beginning,” said Hermann Winkler, general secretary of Saxony’s Christian Democratic Party, referring to the billions of euros in infrastructure development made in eastern Germany since reunification 12 year ago. According to him, it’s as if the region had been pushed back to levels it was at in 1990.

A Blessing in Disguise?

While the damage due to the floods is tragic, some see a possible silver lining. The millions flowing in from the state and federal governments, plus the new business reconstruction will generate, could bring about a badly needed economic boom in eastern Germany. The area is the country’s poorest performing region economically and also has the highest unemployment rate.

The demand for products like televisions, refrigerators, and furniture could provide a boost to local businesses, economists say. Do-it-yourself stores are expected to profit as well. Repercussions could even be felt even beyond the directly affected areas.

“The millions that the state provides will act as a kind of economic development program that could even help companies and craftsmen in western Germany,” Thomas Straubhaar, economist and president of the World Economic Archives in Hamburg, told the news magazine Der Spiegel.

But according to experts, that postive effect will likely prove temporary, and in the mid-term the floods will put a break on the region’s already sputtering economic development.

“Sure it will help if state money starts flowing in and people get insurance payouts,” Karl Brenke, an expert on eastern Germany at the German Economics Institute, told DW-WORLD. “But you shouldn’t overestimate how that will help the overall economy.”

Still, he dismissed the doomsayers who paint a dark picture of eastern Germany thrown back to the bad old days of the GDR, when roads were full of potholes, the infrastructure was creaky at best, and the landscape was littered with the rusting hulks of dying factories. “Sure, the floods were a difficult natural catastrophe,” he said, “but that they’ve put eastern Germany back to where it was in 1990, that’s rubbish. It’s come too far for that.”

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