Flooding costs Germans their promised tax cuts

The German government has abandoned promised tax cuts to help pay the massive bill for flood damage in the east of the country. The governments of Germany's states and local city and town authorities will also have to make a contribution through spending cuts. Together, this will raise almost €13bn (£8.3bn), to be placed in a special "flood solidarity fund".

The German Chancellor, Gerhard Schröder, said he was relying on the great spirit of national solidarity Germans had shown in the response to what he described as a "true national disaster that affects everyone".

The tax cuts, part of a package to encourage enterprise and investment, had been due next year. Initial estimates of the cost of flood damage in Germany, which holds elections next month, are between €10bn and €15bn. Mr Schröder said Germany also expected financial help from the European Union, but he warned that it wanted not "complicated credit arrangements, but the release of actual money".

The EU has offered no new money to Germany, the nation hit hardest by the floods in central Europe. Across the area, finance ministries are counting the cost of a natural disaster that also affected Austria, the Czech Republic, Slovakia and Hungary and claimed at least 109 lives. Yesterday Vladimir Spidla, the Czech Prime Minister, raised his estimate for the damage from the floods that engulfed the country last week to about €2bn, and scrapped plans to buy 24 jet fighters.

The EU, which the Czech Republic hopes to join in 2004, has promised the government €58m but damage estimates were rising steadily as people returned to mud-covered streets. About 70,000 people were forced to leave their homes in Prague, as were more than 130,000 in the rest of the country, in the largest post-war evacuation in the Czech Republic. At least 13 people died in the flooding.

Mr Schröder hosted a meeting of central European prime ministers and the president of the European Commission, Romano Prodi, in Berlin on Sunday. In deferring the tax cuts for a year and announcing the flood relief fund, Mr Schröder was in effect stealing proposals made by his challenger for the chancellorship, Edmund Stoiber. Mr Stoiber, the centre-right premier of Bavaria, has said that if he was elected on 22 September, he would set up a flood relief fund with existing resources.

While it will be hard now for Mr Stoiber to make flood relief an election issue, the measures announced by Mr Schröder are by no means guaranteed to improve his electoral prospects. The Chancellor is behind Mr Stoiber in the opinion polls, although his fortunes have improved a little after what has been widely seen as his capable response to the floods. And amid all the gloom about the scale and cost of the damage in Germany, there was some small consolation. The German Labour Ministry announced yesterday that it would draft 5,000 of the country's four million unemployed to help in stricken areas.

In Hungary, the Danube peaked at a historic high in Budapest without causing major flooding after relief workers spent a frantic night bolstering defences. The capital's high flood walls, built at the turn of the last century, held off the floodwater in the city centre, though one barrier gave way in a northern suburb.