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Floods Could Cost Germany Billions

Firemen evacuate residents from a district flooded by the Saale river in Meissen, Germany. Flooding in some areas of eastern and southern Germany is the worst in 400 years. At least four people are dead and tens of thousands have been forced from their homes.
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Firemen evacuate residents from a district flooded by the Saale river in Meissen, Germany. Flooding in some areas of eastern and southern Germany is the worst in 400 years. At least four people are dead and tens of thousands have been forced from their homes.

Floods that have devastated parts of southern and eastern Germany could briefly impede growth in Europe's biggest economy, an industry body said, while ratings agency Fitch said the economic cost could be as high as 12 billion euros.

That would be more than the damage in 2002, when the region suffered flooding on a similar scale.

Hundreds of thousands of people in Germany, the Czech Republic and Slovakia have been forced from their homes in the past week as floods swept through central European cities and countryside, causing factories to halt production.

Ulrich Grillo, head of Germany's BDI industry association, said it would be difficult but still possible for the country to achieve the group's 0.8 percent growth forecast for this year.

"It is difficult to assess the influence of the floods," said Grillo, adding that reconstruction would in probably compensate long term for the initial drag on the economy.

The economy ministry said that growth has picked up in the second quarter, helped by more demand for German industrial goods. Economy Minister Philipp Rösler said the government's forecast for 0.5 percent growth this year was manageable.

The ministry said in its June monthly report that "the relatively long and severe winter" was one of the main reasons for a weak first quarter, when the German economy grew by a mere 0.1 percent.

Chancellor Angela Merkel, facing an election in September, has promised 100 million euros ($132 million) in aid for flooded areas, including around Passau in southern Bavaria, Dresden in the eastern state of Saxony and areas further north.

Cologne's Institute for Economic Research has said the deluge could cost more than 6 billion euros.

Fitch said that insurers could face a hit of up to 3 billion euros from damage claims but that there would be no big threat to their credit ratings.

Carmaker Volkswagen was one of the companies forced to shut a plant in Saxony, and shipping on the Rhine was interrupted.

Germany's big insurers listed on the stock market, Allianz, Munich Re and Talanx, have said it is too early to estimate the size of damage claims.

Industry trade body GDV said that it had to be assumed that insured losses from the flooding would be larger than the 1.8 billion euros that insurers absorbed in 2002 for floods in the region—a view echoed by several large property insurers.

Separately, Vienna Insurance Group estimated it faced a hit of 40 million to 45 million euros, versus 20 million euros 11 years ago.

It stressed that the overall assessment was still in flux, with the main damage reported so far in the Czech Republic and Austria. The group couldn't make predictions for Slovakia, Hungary and other countries along the Danube.

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Contact Europe: Economy

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