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Sunday, 18 August, 2002, 18:45 GMT 19:45 UK
EU pledges flood recovery aid
A flooded street in the German town of Meissen
The summit will address recovery efforts and funding
The European Union has pledged to release funds to help central European countries recover from the devastating effects of floods that have killed more than 100 people.

Commission President Romano Prodi made the announcement at a meeting in the German capital, Berlin of leaders of four of the countries worst affected.

The monies were to come from unspent funds from the EU's structural budget - although no exact figure has been released.

The cost of the devastating floods is still largely unknown, but is expected to run into tens of billions of dollars.

The meeting, hosted by German Chancellor Gerhard Schroeder was attended by leaders from Austria, Slovakia and the Czech Republic.

The European Investment Bank (EIB) has already pledged millions of euros in loans to help finance the clean-up operation.

Emergency fund

The bill for repairing the damage in Germany alone has been put at 15bn euros, while in Austria the clean-up bill has been forecast at 2bn euros.

Chancellor Gerhard Schroeder has acknowledged that it will cost billions to rebuild areas in southern and eastern Germany wrecked by the floods, but said it is still too early to assess the full extent of the damage.

Enlarge image
Enlarge image
Mr Prodi said it was important to show Europe supported the stricken countries.

And the BBC's Jamie Coomarasamy says the EU pledge to countries that are not members is an important symbolic gesture at a time when the Union's enlargement has hit political difficulties.

However, the EU has no emergency budget to deal with such crises - the Austrian and German chancellors said they wanted to see one set up to deal with any future disasters.

According to Mr Schroeder, its budget could be in the region of 0.5bn euros.

Production halted

The European Investment Bank is offering a special programme for some of the affected countries, which is likely to take the form of low-interest loans with maturities of up to 30 years.

EU members and candidate countries like the Czech Republic, are eligible for emergency assistance under the EU's foreign aid programmes and could receive up to 50m euros in aid.

In addition to the cost of the clean-up, there will be a severe impact on the tourism industry in historic city centres such as Prague and Budapest.

Production has ground to a halt at many local factories, farmers are threatened, and insurers are already trying to assess the impact of potentially huge pay-outs.

German dilemma?

Discussions about how much the EU should help affected countries, faced with billions of euros in recovery costs, will be especially important to Germany.

The BBC's Jonty Bloom in Berlin says this poses a particular problem for Germany, because under the rules of the single currency - the so-called stability pact - there is a limit to how much countries of the Eurozone can borrow.

Even before these floods, Germany was close to breaching that limit.

However the German chancellor reacted with irritation when asked whether the floods would mean Germany would breach the terms of the stability pact, calling it an abstract debate, our correspondent says. Mr Schroeder said the floods would not endanger the German government's spending limits.

Mr Prodi has made it clear that the exemptions to the stability pact are not up for discussion.

 WATCH/LISTEN
 ON THIS STORY
Nick Carey, Prague Business Journal
"The insurance companies are trying to figure out what the damages are and where they've been caused."
The BBC's Paul Anderson
"Germany is going to have to rely on the generosity of others"

European havoc

Germany ravaged

Prague drama

Freak phenomenon?

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TALKING POINT
See also:

16 Aug 02 | Business
18 Aug 02 | Europe
17 Aug 02 | Europe
17 Aug 02 | Europe
16 Aug 02 | Europe
15 Aug 02 | Europe
16 Aug 02 | Europe
13 Aug 02 | Entertainment
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