Tally starts as cresting waters continue trip through Central Europe

By bne IntelliNews June 7, 2013

bne -

Authorities, emergency services and volunteers across Central Europe spent June 6 preparing for cresting river levels along the Danube and Elbe rivers amongst others. Meanwhile, in areas where the waters have receded such as Prague, the cost of the worst floods since the catastrophic events of 2002 is starting to be totted up.

Rolling to the south east, the Danube peaked in the Slovak capital Bratislava on June 6, with the city's main flood defences holding firm for the most part. The river is not expected to reach its peak in Hungary's Budapest until June 11.

Along the Elbe in the Czech Republic, huge areas remain under water and emergency workers are using boats to get supplies to people cut off. Meanwhile, the focus of much media attention has moved to Germany. Dresden appears to have survived the June 6 crest of the Elbe in the city reasonably unscathed. However, the floodwater now continues to flow to the north-west, putting much of Saxony at risk.

The alerts are clearly moving out along the rivers from the central point of Austria and the Czech Republic, where flooding began on June 1 following days of torrential rain. Prague declared a state of emergency the following day, raising fears across the region of a repeat of the 2002 disaster that killed 17 and cost billions of euros.

While the economic cost of the current events is not expected to approach that, the cost in human life is not far off. To date, three people have died in Germany, eight in the Czech Republic and four in Austria, according to an EU status report. Tens of thousands also remain in temporary shelter across the region, evacuated from low-lying areas.

In the Czech Republic, with the Vltava River, which runs through the centre of the capital Prague, cresting on the morning of June 4 without inundating the city centre, the $150m reportedly spent on improving defences appears money well spent. Elsewhere, however, towns in Bohemia have not escaped so lightly. However, water levels in the northern industrial city of Usti nad Labem finally peaked at 10.7metres - close to 2002 levels - late on June 6.

It's a similar story in Slovakia, where the Danube crested in Bratislava on June 6 without making major inroads into the city centre. Authorities, which declared a state of emergency on June 4, have praised the flood defences installed between 2005 and 2010. However, villages and suburbs around the capital are currently experiencing severe floods, according to the European Commission.

The Danube wave will next pay a call to Hungary, which also called a state of emergency on June 4. With the river expected to reach peak levels on June 11, temporary defences are being built across the country. Prime Minister Viktor Orban said on June 6 that more than 80,000 people may have to be evacuated in a worst-case scenario.

Counting the economic cost

In Prague, with the waters receding, the initial tally of the economic costs has begun. Prime Minister Petr Necas announced on June 5 that the government will increase the emergency budget for transportation infrastructure repairs by CZK2bn (€77m). The government released CZK1.3bn from the infrastructure fund on June 3. A total of 93 roads and seven railroads in Bohemia remain closed. No estimate has yet been released for the cost of the damage to the country's transportation infrastructure caused by the rains and floods.

However, the Czech Insurance Association said on June 6 that they may have to pay out up to CZK7.5bn. The Association added that its members have already registered 10,000 claims, but estimates that figure could rise to 96,000, reports Reuters. Czech insurers paid out CZK35bn in 2002.

At the same time, early estimates of the total cost to the economy were put at around CZK30bn (€1.17bn) by an analyst from Erste the same day. Martin Lobotka told the Prague Post that the tab would clearly be a lot lower than the CZK73bn seen in 2002. He added that the economy - currently in the midst of its longest ever recession - could see a boost of up to 0.3% of GDP thanks to the necessary repairs and reconstruction - a sort of enforced push out of austerity for the government.

Losses to businesses are reported to be limited thus far, although industrial facilities in the north of the country were forced to close. In addition, German carmaker Porsche halted production at its Leipzig assembly plant on June 6 as closed Czech freight rail routes disrupted parts supplies from Slovakia. That's bad news for Bratislava, given the huge role the auto industry plays in the fragile Slovak economy. Meanwhile, Prague hotels reported only very limited cancellations.

Prime Minister Petr Necas said on June 3 that the bill would probably exceed CZK22bn, the threshold above which the country can apply for assistance from the European Union Solidarity Fund.

However, despite pledges of support, Brussels offered an unpleasant surprise two days later, when European Budget Commissioner Janusz Lewandowski announced that the EU's emergency fund has already been depleted. "The scale of the catastrophe is absolutely beyond the reimbursement [possible] in these countries," he told reporters. "We are without resources, for sure; for the European Solidarity Fund. In 2013 it is not possible." He added that one option would be for countries to be reimbursed for their emergency measures only next year.

The European commissioner for International Cooperation, Humanitarian Aid and Crisis Response, Kristalina Georgieva, said in a statement the same day that the bloc stands "ready to help at any moment". She said the EU has "specialised equipment and teams available for deployment at short notice".

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