Germany’s flood recovery fund to top €20 billion

Berlin – Germany’s planned flood recovery fund will top €20 billion ($23.5 billion), more than double an initial projection, two people familiar with the internal discussions said Monday.

Heavy rainfall and flooding last month took many towns in western and southern Germany by surprise despite extreme weather warnings. More than 180 people died in the country’s worst natural disaster in more than half a century which also destroyed many homes, roads, rail tracks and bridges.

Officials initially estimated that reconstruction in Germany’s flood zones would probably cost more than €10 billion but more detailed analysis of the damage since then has put the cost much higher.

The federal government and the state governments have already agreed to share the fiscal burden in equal parts.

Finance Minister Olaf Scholz, who is running as the center-left Social Democrats’ candidate to become chancellor in a September election, has said people could count on emergency aid worth more than €400 million.

The planned reconstruction funds of more than €20 billion will be set up over several years, the two sources said. They did not wish to be identified because of the sensitivity of the matter.

Chancellor Angela Merkel, Scholz and leaders of Germany’s federal states will discuss the emergency aid and reconstruction fund for the flood victims during a virtual conference Tuesday.

The Cabinet in June approved a draft budget for next year with new debt of nearly €100 billion ($119 billion) to finance further COVID-19 measures, pushing up total pandemic-related borrowing in the period 2020-2022 to €470 billion.

Merkel and Scholz have implemented an unprecedented array of rescue and stimulus measures since March last year to cushion the impact of the COVID-19 pandemic on Europe’s biggest economy.

The packages have been financed with record new borrowing of €130 billion in 2020 and €240 billion in 2021 for which an emergency clause was used to suspend debt limits in the constitution. The limits will have to be suspended for the third year running to allow borrowing of €99.7 billion in 2022.