EU Aid Pledge for Poland May Not Fully Address Flood Losses, Minister Reports

By Karol Badohal

WARSAW (Reuters) – Polish Finance Minister Andrzej Domanski expressed concerns on Friday that the 5 billion euro ($5.6 billion) commitment from the European Union to aid the country in recovering from its most severe flooding in the past two decades may fall short of covering the extensive damages sustained.

The recent floods have wreaked havoc across Poland, a key economy in central Europe, with some analysts projecting that the costs could rival or even surpass those incurred during the devastating floods of 1997.

European Commission President Ursula von der Leyen announced on Thursday that the EU would allocate billions to support central Europe in its recovery efforts following the catastrophic floods.

"We are aware that the losses are substantial, although we do not yet have an exact figure," Domanski stated in an interview with private broadcaster TVN24.

While he acknowledged that the pledged amount of 5 billion euros for Poland is a reasonable estimate, he emphasized that it is not sufficient to cover the entirety of the losses incurred.

Domanski refrained from providing details on what proportion of the total damages the EU’s pledged funds, equivalent to approximately 0.6% of Poland’s expected economic output in 2024, would address. “I’m not sure. The damage assessment is still in progress,” he noted.

In 1997, catastrophic flooding in southwestern Poland resulted in damages estimated at 12 billion zlotys, which would be equivalent to around 34 billion zlotys today when adjusted for inflation.

Economist Slawomir Dudek remarked on social media earlier this week that infrastructure advancements over the past three decades have exacerbated the scale of destruction in the affected regions.

He warned that Poland may need to revise its 2024 budget as the full extent of the damage becomes clear.

With the government projecting a general deficit of 5.7% of GDP in 2024 and 5.5% in 2025, Poland has been instructed by the EU to reduce its deficit to the bloc’s 3% threshold in the forthcoming years.

Domanski has indicated support for a gradual four-year plan to reduce the deficit. “I will advocate for this path of fiscal adjustment to be as manageable as possible, given the extraordinary challenges Poland is currently facing,” he added.

Warsaw has attributed its elevated deficit levels to increased defense spending following Russia’s invasion of Ukraine, alongside impacts from the COVID-19 pandemic and recent energy price fluctuations.