EU's aid pledge for Poland may not cover all flood losses, minister says

By Karol Badohal

WARSAW (Reuters) -Polish Finance Minister Andrzej Domanski said on Friday a pledge worth 5 billion euros ($5.6 billion) from the European Union to help the country recover from its worst flooding in at least two decades may not be enough to cover its losses.

The worst floods to hit central Europe in recent memory have caused widespread damage in Poland, the region's main economy, with some analysts saying the final cost could be on a par or even exceed that seen after devastating floods in 1997.

European Commission President Ursula von der Leyen said on Thursday the EU would make billions of euros available to help central Europe recover from the severe floods.

"We know that the losses are very large, very high, although we do not know the exact number yet," Domanski said in an interview with private broadcaster TVN24.

"So I think that this amount, these 5 billion euros for Poland is an adequate amount. It does not mean at all that it is an amount sufficient to cover all the losses."

Domanski declined answer questions on how much of the total damage the EU's pledged funds - worth some 0.6% of Poland's 2024 economic output - would cover.

"I'm not sure. The damage assessment is ongoing," he said.

In 1997, massive flooding devastated south-western Poland, causing some 12 billion zlotys in damage, or 34 billion zlotys in today's prices.

Infrastructure development in the past three decades has increased the scale of damage in the affected area, Polish economist Slawomir Dudek wrote on social media platform X earlier this week.

He said Poland might be forced to amend its 2024 budget once the final cost of the deluge emerges.

Poland, which forecasts its general government deficit at 5.7% of gross domestic product in 2024 and 5.5% in 2025, has been tasked by Brussels with reducing the shortfall to the bloc's 3% limit in the coming years.

Domanski has previously signalled he was in favour of a four-year deficit reduction path.

"I will fight for this path of fiscal adjustment, that is limiting the deficit in the coming years, to be as gentle as possible, adapted to the exceptional situation in which Poland finds itself," he said.

Warsaw has cited increased defence spending following Russia's invasion of Ukraine, in addition to the COVID-19 pandemic and energy price shocks in recent years, as the main cause for its elevated deficit levels.

($1 = 0.8959 euros)

(Reporting by Karol Badohal; Editing by Hugh Lawson and Christina Fincher)