While the European Commission and the ECB discuss how to offer assistance, the flooded countries may get more immediate help from the European Investment Bank
The European Commission is usually content to doze through August but the floods in Germany and central Europe have come as a rude interruption to routine.
Next Wednesday's meeting of European Commissioners, the first after the summer break, was to have been an occasion for visionary thinking. Now it will be dominated by the more concrete issue of how the EU should respond to floods that have engulfed large areas of its present and future territory, destroying infrastructure and ruining livelihoods.
But European Commission officials preparing for that meeting are struggling to pin down hard facts and figures as to the consequences of the catastrophe.
Estimates of the cost of the flood damage are still crude. In Germany the figure is put at €15 billion, in Austria €2 billion, in the Czech Republic it is somewhere between €2 and €3 billion, and in the Slovak Republic it is €45 million.
Mr Pedro Solbes, the European Commissioner for economic and monetary affairs, has not yet ventured any assessment of the possible impact of the disasters on the euro-zone economy. Instead he has limited himself to a declaration from his holiday home that he is content with Germany's decision to postpone tax cuts.
The Stability and Growth Pact, by which member-states undertake to maintain prudent fiscal and spending policies, is, according to Mr Solbes, unthreatened by the floods.
In Frankfurt, the European Central Bank (ECB) is maintaining a discreet silence. The agenda of the governing council of the ECB is not published but the effect of the floods is sure to come up at their meeting next Thursday. "We do not live in an ivory tower," said an ECB spokesman.
The task of the ECB was to look at the euro zone as a whole, he added, not individual countries. But less politically constrained observers know that whatever affects Germany, the biggest economy in the euro zone, has knock-on effects for everyone else.
Back in Brussels, some Commission officials play down the extent to which they can help Germany. Privately, they acknowledge that German Chancellor Mr Gerhard Schröder played a politically astute hand last weekend when he convened a meeting in Berlin with Austrian Chancellor Mr Wolfgang Schüssel, their Czech and Slovak counterparts, and the president of the European Commission, Mr Romano Prodi. The effect for the television cameras was of a man in charge, directing operations during a crisis.
But those same officials point out that there is a limit to the help that Mr Prodi and the European Commission can offer. It is a cast-iron rule of the EU's regional aid money that funds cannot be transferred across national boundaries. So the money already ear-marked for the Republic between now and 2006, for example, cannot be poached by Germany.
What the European Commission may permit is for Germany to fund projects to help flood recovery with money from its regional aid allocation that has not yet been spent. But that would mean taking the money away from the projects for which it was originally intended, with consequent political risks.
Less controversially, the Commission will relax the rules on state aids. So if a business has been deemed eligible for a state subsidy and has received the money but its effects have now been washed away, the Commission would allow Germany's federal or regional government to make a repeat grant. In addition, the rules obliging governments to advertise public works projects throughout the EU will be relaxed so as to speed up reconstruction.
Similarly, the Commission's agriculture department is likely to relax some rules for payment claims made by German farmers whose land is flooded.
Given the scale of the disaster, such assistance looks like small beer. Mr Schröder and Mr Schüssel are pushing for a revival of an emergency fund that would be held by the European Union to assist in the event of natural disasters. But the idea is fraught with difficulty. Such a fund used to exist but was too small to be effective. And who would decide when a disaster qualified for payments from the fund? Some natural disasters, such as the breach in the Donana dam, which flooded and contaminated a river estuary in Spain, may be blamed on industries or even governments.
Despite the difficulties, the political mood dictates that the European Commission's environment department, headed by Irishwoman Ms Catherine Day, will be asked to draw up options for such a fund.
The flooded countries may find more immediate help from the European Investment Bank (EIB), the EU body that helps finance capital investment projects, inside and outside the EU. It has helped finance roads, railways, water systems and telecoms networks across the whole of the EU, and it has seen the aftermath of floods before. In recent years, it has provided special help after floods in Poland, Germany, northern Italy and along the Dutch-Luxembourg-German borders. It was also involved in financing projects after earthquakes in Turkey.
An EIB official, Mr Orlando Arango, said: "The first aim will be to get the transport to function - the bridges, the roads and perhaps ports. The next step is perhaps to ensure the water supply - you want to reduce the health risks so you have to have sewers and potable water. Then you have to have energy and telecoms.
"After that you can move into the whole open area of all that makes up economic activities."
The EIB has indicated that it is ready to help finance flood repairs by providing long-term cheap loans, which might run into billions of euros.
The EIB, Mr Arango said, might be lending to national, regional or municipal governments. It might provide loans for a factory to replace its machinery or to re-equip the kitchen in a hospital.
Mr Arango said he had seen the recovery work after floods in northern Italy. This time, the floods in Germany were "much bigger and the destruction is much greater".
"But I think we have plenty of capacity to fix things. What would be depressing is if, at the beginning of the reconstruction activity, people don't see things being repaired," he said.
He expected it would take a month to assess the extent of the damage and what had been destroyed, another month for the public authorities to work out their priorities and then a month to prepare the details of their projects. On that basis, the EIB would be working through applications for loans within three months and would be making decisions by the end of the year.
The economic consequences of the floods will take longer to work through. Even before the waters rose, the prospects for economic growth were looking fragile, particularly in Germany. So perhaps it is understandable that European Commission officials are reluctant to go public with an estimate of the effects.
"It will be difficult of course. It will affect the economic situation in Germany," said Mr Lubomir Durzo, deputy head of mission of the Slovak Republic.
The economies of central Europe depend increasingly on the markets of the EU, particularly Germany. But Mr Durzo was optimistic that the negotiations for enlargement of the EU would be unaffected. The attention of the negotiating teams would not be deflected, he said.
Which does not mean that the enlargement negotiations will be unaffected.
One of the issues that the existing EU member-states have to face before the negotiations are concluded is a financial deal: basically who pays in what and who gets what out once EU membership is expanded. Another issue is the size of payments the new members would be eligible for under the Common Agricultural Policy (CAP). That issue is complicated by the reforms to the CAP proposed by Agriculture Commissioner Mr Franz Fischler, which are under discussion.
In all three of these issues, the fact that Germany is the biggest net contributor to the EU budget looms large. Clearly Germany is feeling the economic pinch. The floods have forced Chancellor Schröder to postpone promised tax cuts. Whatever the result of the German elections, whether Mr Schröder or conservative challenger Mr Edmund Stoiber comes out on top, the floods will complicate the already complicated negotiations for enlargement of the European Union.
