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Paying for the Floods

The European Union has pledged to release funds to help areas of central Europe devastated by floods. Redirecting so-called "structural funds" could bring Germany five billion euro in aid.

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The flood waters are receding in some areas leaving billions of euros in damage behind.

In an emergency session on Sunday in Berlin, leaders from Germany, Austria, the Czech Republic and Slovakia met with EU officials and agreed on the outline of a plan to provide relief to flood-stricken areas, where damage estimates are already in the billions.

The relief monies were to come from redirecting money from the European Union's structural funds, a 213 billion euro ($208) budget set aside from 2000-2006 for regional development. According to the plan agreed upon in Berlin, money that has not already been earmarked for projects can be used for repairing flood damage.

According to a spokesman in Berlin on Monday, Germany will redirect some of the five billion euro ($4.8 billion) of its unspent portion of the structural funds to help rebuild areas of eastern Germany ravaged as torrential rains caused the Elbe and Danube rivers and some of their tributaries to overflow.

An exact sum coming from the EU, however, was not yet available. A spokesman in Brussels said the EU needed more exact information from Germany and other affected countries as to the extent of the damage.

"We want to help," the spokesman said, "but first we have to sit down with national and local authorities and see how much money is needed."

Other Sources

At Sunday's emergency meeting, leaders also suggested setting up a new European emergency relief fund so that the bloc can react more quickly with financial aid in the future.

"We talked about starting with about 500 million euro ($488 million), but this is a very preliminary figure which needs to be discussed among foreign minister and unanimously supported by the European Council," Chancellor Gerhard Schröder said at a press conference.

European Commission President Romano Prodi, who was at the Berlin meeting, confirmed that the European Investment Bank had already pledged millions of dollars in low-interest loans to both EU and non-EU countries to finance state spending on damage repair.

In addition, both EU members and candidate countries such as the Czech Republic are eligible for emergency assistance under the EU's foreign aid programs. They could receive up to 50 million euro ($48.8 million) in aid.

Damage Estimates

The bill for repairing the damage in Germany alone, which has been hit hardest by the flooding, has been put at some 15 billion euro ($14.6 billion). The federal government has said it is preparing a first phase of a relief package of at least 400 million euro ($390 million). The 100 million euro ($97.6 million) that has already been made available is just a beginning, according to Gerhard Schröder, who is meeting with his cabinet on Monday.

To cover the unexepected flood expense, the government has decided to postpone any new state investments. Other suggestions for financing the reconstruction are being floated, including a bond initiative called "German Solidarity," a general "Solidarity Contribution" of 15 euro that every tax payer would make, or an increase in the value added tax (VAT) rate. This being an election year, the current government, which is fighting for its political survival, has rejected the last two suggestions outright.

Chancellor Schröder insisted the extra funding needed to repair the damage would not push Germany's budget deficit above the maximum of three percent of gross domestic product. The EU's Growth and Stability Pact, which Germany was key in formulating and seeks to encourage fiscal discipline on its members, imposes fines if a country's deficits go above three percent of GDP. Germany got an embarrassing warning from Brussels early this year when its deficits did come dangerously close to that upper limit.

Staggering damage across Europe

The Czech Republic, and in particular its capital Prague, were also hard hit by rising waters. Some 200,000 people were forced from their homes, and 13 people are known to have died in the flooding. Czech Prime Minister Vladimir Spidla put preliminary damage estimates at $2 to $3 billion (euro) and analysts say the disaster could cut as much as half a percentage point off the country's annual GDP. If estimates are correct it would be the most costly natural disaster in Czech history. The EU has promised Prague some 58 million euro ($57 million).

Floods have severely damaged some 10,000 houses in Austria and killed at least eight people, the government in Vienna reported on Monday, and was the "worst national catastrophe that Austria has experienced since World War II." The government was reluctant to give damage figures but said preliminary estimates pointed to a sum between two and five billion euro ($2 - $4.8 million).

In Hungary's capital Budapest, residents are breathing a little easier since the flood swell from the swollen Danube did not break through the city's defences early Monday morning, largely thanks to thousands of soldiers and volunteers who worked frantically overnight to shore up the 10-meter-high defenses along the river's banks.

Some two thousand people had to be evacuated from parts of the city. In an emergency session on Sunday, the Hungarian parliament pledged immediate aid of 11.25 million euro ($10.9 million) and cancelled its traditional fireworks show over the Danube planned on Tuesday for St. Stephan's Day, Hungary's national holiday.

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