UPDATE 1-German flood recovery fund will exceed 20 billion euros -sources

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* Merkel to discuss the fund with state prime ministers on Tuesday

* Scholz pledged quick, unbureaucratic emergency aid

* Reconstruction fund to be set up for several years (adds a second source, context)

By Holger Hansen and Michael Nienaber

BERLIN, Aug.9 (Reuters) – Germany’s planned flood recovery fund will exceed € 20 billion ($ 23.5 billion), more than double an initial projection, two people told Reuters on Monday. familiar with internal discussions.

Heavy rains and flooding last month surprised many cities in western and southern Germany despite extreme weather warnings. More than 180 people have died in the country’s worst natural disaster in more than half a century, which also destroyed scores of homes, roads, railways and bridges.

Authorities initially estimated that reconstruction in flood-prone areas in Germany would likely cost more than € 10 billion, but a more detailed analysis of the damage since then has pushed the cost much higher.

The federal government and state governments have already agreed to share the tax burden equally.

Finance Minister Olaf Scholz, who is posing as the center-left Social Democrats’ candidate for chancellor in the September elections, said people could count on emergency aid worth more than 400 million euros.

The planned reconstruction fund of more than 20 billion euros will be set up over several years, the two sources told Reuters. They did not wish to be identified due to the sensitivity of the matter.

Chancellor Angela Merkel, Scholz and leaders of German federal states will discuss emergency aid and the reconstruction fund for flood victims on Tuesday at a virtual conference.

The cabinet approved in June a draft budget for next year with new debt of nearly 100 billion euros ($ 119 billion) to finance new COVID-19 measures, bringing the total borrowing linked to the pandemic during the period 2020-2022 to 470 billion euros.

Merkel and Scholz have implemented an unprecedented array of rescue and stimulus measures since March last year to cushion the impact of the COVID-19 pandemic on Europe’s largest economy.

The plans were funded by new record borrowing of € 130 billion in 2020 and € 240 billion in 2021 for which an emergency clause was used to suspend debt limits in the constitution. The ceilings will have to be suspended for the third consecutive year to allow a loan of 99.7 billion euros in 2022.

($ 1 = 0.8506 euros) (Reporting by Holger Hansen and Michael Nienaber Additional reporting by Christian Kraemer Editing by Caroline Copley, Douglas Busvine and Susan Fenton)


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