June 13 (Bloomberg) -- German Chancellor Angela Merkel’s government may be forced to accept a supplementary budget for next year to cover the costs of floods that have ravaged large parts of the country, a senior lawmaker said.
Swollen rivers including the Elbe and Danube have caused about 12 billion euros ($16 billion) in damage, according to Fitch Ratings. Merkel’s government and some of Germany’s 16 states have agreed to provide around 8 billion euros for a joint flood aid fund, Die Welt newspaper reported today, citing coalition members it didn’t name.
“I can’t imagine that we can come up with such an amount quickly by means of spending cuts,” Norbert Barthle, the budget spokesman for Merkel’s Christian Democratic Union in the lower house of parliament, said in an interview. “It seems to be clear that we’ll most probably have a supplementary budget.”
As tens of thousands of German residents are forced to leave their homes less than four months before national elections, Merkel and the prime ministers of the 16 states are due to meet in Berlin today to discuss the size of the fund and the share of federal and state contributions.
How to Pay
Merkel faces unpopular choices on ways to pay for the most severe flooding in more than a decade. Saxony-Anhalt Prime Minister Reiner Haseloff, a member of Merkel’s CDU, suggested raising the solidarity surcharge on income and profits for a limited time even after Federal Economy Minister Philipp Roesler, a Free Democrat, rejected calls for tax increases.
“I can’t say at this stage what we will decide and when,” Barthle said. The lower-house budget committee may gather for a special meeting as soon as tomorrow to discuss financing, though it’s unclear when any results can be expected, he said.
Higher federal borrowing in 2014 to pay for the flood costs wouldn’t affect a measure of the budget that strips out swings in the economy and one-time factors such as natural disasters. Finance Minister Wolfgang Schaeuble has said he wants to balance the budget in these “structural” terms next year and eliminate net new borrowing altogether in 2015.
The European Investment Bank said yesterday that it is considering loans to flood-affected countries including the Czech Republic and Hungary that could be on the scale of the 1 billion euros provided in 2002 under similar conditions.
While emergency aid can be provided through “non-budgeted expenditures,” for larger sums “a supplementary budget may be required,” Priska Hinz, budget spokeswoman for the Green party in parliament, said in an e-mailed comment. “After the acute emergency aid we also need long-term assistance to rebuild infrastructure in the coming years.”
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