By Ulrike Dauer
Europe's biggest economy is unlikely to suffer a major setback
from the dramatic flooding in Germany because the damage to
buildings, roads and power supplies has been limited, an economic
think tank said Monday.
And if some key industrial sites like Volkswagen AG's (VOW.XE)
auto plant in Zwickau, the Porsche AG unit at Leipzig and the
chemical park in Bitterfeld have had to stop production for a few
days, the plants themselves weren't damaged, said the Institut der
deutschen Wirtschaft think tank in Cologne.
While the national economy shouldn't suffer much, the flood will
prolong the recession in eastern Germany, said another economic
think tank that advises the German government. The Halle-based IWH
Institut fuer Wirtschaftsforschung said the region would remain in
a recession for the fifth consecutive quarter from April through
June.
In the immediate aftermath of the floods, the three east German
states most affected are likely to see activity decline in
industries like agriculture, construction, tourism, the IWH
said.
But Germany's economy will gain momentum once cleanup efforts
begin, as was the case after the historic floods of August 2002,
the IWH said. That disaster led to a surge in consumer spending and
investment to rebuild the country's industrial infrastructure.
This could be encouraging for the government of Chancellor
Angela Merkel, who is preparing a crisis meeting Thursday with the
heads of Germany's states on how to share the bill for the
disaster. Ms. Merkel faces elections later this year.
The floods began last week after days of heavy rain. Large
swaths of Germany remain under water, mainly along the Danube and
the Elbe. The Czech Republic, Austria, Slovakia and Hungary have
also been hit.
The IW institute estimates the floods will cost the German
economy at least 6 billion euros ($7.92 billion). That's far below
the estimate late last week of some EUR11 billion from the
Association of German Chambers of Commerce and Industry, which is
on par with the costs from the 2002 floods.
By comparison, Germany's gross domestic product was EUR2.65
trillion in 2012.
The 2002 floods caused about $16.5 billion in economic damages
across all of Central Europe, ranking them the fifth costliest
worldwide since 1980, according to Munich Re AG, the world's
biggest reinsurer. The insured loss was $3.4 billion, the second
costliest flood for the industry since 1980.
Insurers and reinsurers say it is still too early for claims
estimates. A Hannover Re SE (HNR1.XE) spokeswoman said the
reinsurer needs to wait until water levels have declined everywhere
before it can begin to calculate the insured damage. This will take
several days.
Write to Ulrike Dauer at ulrike.dauer@dowjones.com