The European Investment Bank (EIB) said yesterday it would offer water-logged countries in central Europe millions of euros in loans to finance state spending on repairing flood damage.
"The EIB is prepared to offer a special programme for the affected countries of Germany, Austria, the Czech Republic and Slovakia," its vice-president Mr Wolfgang Roth wrote in a letter to German chancellor Gerhard Schröder and other European leaders ahead of a meeting in Berlin.
Flood waters have ravaged vast swathes of central Europe in the past week, causing tens of thousands of people to be evacuated and claiming at least 91 lives in Germany, Russia, Austria and the Czech Republic.
An EIB spokesman said the bank could offer low-interest loans with maturities of up to 30 years, worth as much as a billion euros in total. "At the moment it is very hard to estimate. It will certainly be in the high millions of euros," he said. Asked if the amount could top a billion euros, he said: "It is not improbable."
Leaders from Germany, Austria, the Czech Republic and Slovakia were meeting in Berlin yesterday to discuss funding the clean-up operation. European Commission president, Mr Romano Prodi was expected to attend.
After pledging €385 million in state aid last week for repairs, Mr Schröder yesterday said the cost of damages from floods that have ravaged swathes of eastern Germany would run into billions of euros.
"We are not talking about hundreds of millions of euros here, we are talking about billions," he said. "We will make the necessary funds available from the national budget alongside funding possibilities beyond that," he said, without giving further details.
Certain reports suggest Mr Prodi would promise Germany more than €1 billion in financial assistance, although officials in Brussels and Berlin said it was too early to speculate on the amount.
With a federal election in Germany just five weeks away, a political debate is beginning about funding the repairs for the formerly communist east as the waters start to recede in some areas at least.
A leading member of the ruling Social Democrats said last week the extra funding needed to combat devastating damage could push Germany above the maximum 3 per cent deficit of gross domestic product set by the EU Stability and Growth Pact.
But the finance minister Mr Hans Eichel said on Friday that Germany's adherence to the pact was not in question despite the planned aid.
The stability pact is designed to ensure deficits do not balloon out of control in euro-zone states. Earlier this year, Germany avoided a formal warning form the European Commission, which projected its deficit would rise to 2.8 per cent of GDP this year.
The ceiling set by the EU is 3 per cent and Germany promised to bring its total government spenign "close to balance" by 2004. A breach of the guidelines last year by the Irish Government triggered a reprimand by the Commisison.
