Flood damage in north Moravia to deepen state budget deficit

The floods that devastated portions of north Moravia will have a significant effect on the Czech economy over the course of 2009 as billions of crowns in government funds go to environmental and infrastructure recovery, forcing the government to reconsider its previously approved budget, said Finance Minister Eduard Janota.

Heavy rainstorms took the north Moravian regions and Olomouc by surprise in the last week of June, killing 13 and leaving vast stretches of roadways and villages underwater in the worst natural disaster in the country since the floods that killed 17 in 2002. The long aftermath of flood recovery will take a heavy toll as well, costing at least 5 billion Kč ($267.4 million), according to Janota, who said flood relief would almost certainly lead to a state deficit of at least 165 billion Kč, or 15 billion Kč more than previous estimates.

On June 25, the government announced it would earmark 99 million Kč in flood relief aid to be distributed as soon as possible. It is clear that billions of crowns must be distributed as aid in north Moravia as soon as possible, said Radek Ležatka, spokesman for the Finance Ministry, but just how long and expensive the recovery process will be remains unclear.

"All numbers are premature, but we estimate that we will have to pay about 4 billion Kč for the damage to public property," he said. "Some of the funds will be administered at once, and some over time."

In a recession year, when state funding is scarce and all Czech ministries face tighter budgets, the floods came as an especially unwelcome surprise, as the government now has to find the funds to help the region recover. Under the circumstances, the government is willing to re-evaluate its previously approved budget and will spare no costs in aiding affected regions, Defense Minister Martin Barták said in a televised statement June 28.

"The security of people and of our country is an absolute priority, and the government definitely shares this position," he said.

Barták mentioned more sweeping measures the government might take to gather funds for flood aid, including fund restructuring and further cutbacks on spending. In addition to government funding, the Defense Ministry deployed up to 700 soldiers per day to the flooded region to assist law enforcement and help with the rebuilding process.

"We have troops working on seven destroyed bridges," said Defense Ministry spokesman Andrej Čírtek. "For now, we're setting up temporary bridges, but our engineers will be there for some time to come."

The large infrastructure most affected by the floods are roadways, bridges and railroads, all of which fall under the auspices of the Transportation Ministry, which faces a severe funding shortage this year. Even with a tight purse, refusing to rebuild infrastructure destroyed by the floods is simply not an option, said Transportation Ministry spokesman Jakub Ptačinský.

"It is known that we have a lack of funds, but it is logical and absolutely important that these things are rebuilt," he said. "There is no way not to rebuild them, and we want to have the damage repaired by the end of the year."

All government ministries say they take natural disasters into account when developing budgets, even in a year of economic volatility such as this one. But the recent floods could be even more costly than those of 2002, something no one was prepared for, Ptačinský said.

"We do have some funds allocated for extraordinary expenses, but there is no way to really prepare for a disaster of such an extent," he said.

Fortunately, there remain significant funds that were generated to aid recovery from less serious flooding in 2006. The Finance Ministry estimates there remains about 1 billion Kč in the state coffers that could be sent to Moravia.

"Of course, in the state budget, there are government reserves, a part of which is designed for natural catastrophes," he said. "But, in the case of such destructive floods, it is necessary to search for additional funds, including the one billion [crowns] originally earmarked for covering the damage of the 2006 flooding that is immediately available."

Additional funding will most likely come from the European Investment Bank (EIB), which could buy Czech bonds, according to Janota, who has mentioned the likelihood of the EIB purchasing 3 billion to 4 billion Kč of Czech bonds by August.

The state will cover most of the funds for flood relief, Janota said, but the government would most likely have to take loans and seek outside aid from organizations such as the EIB.

Stephan Delbos can be reached at
sdelbos@praguepost.com