Spain Risks $11.5 Billion Flood Damage Bill, PM Says

Spanish Prime Minister Pedro Sanchez announced the first financial package for victims of the storms that killed more than 200 people in the country’s eastern region of Valencia.

Spain will earmark as much as €10.6 billion ($11.5 billion) for its first relief package and more will be announced in the future, Sanchez said in a press conference Tuesday in Madrid. The package includes direct aid for households, self-employed workers and firms; state-backed credit guarantees for companies and residents; and funds for city governments to pay for repairs and reconstruction.

The announcement comes less than 24 hours after Carlos Mazon, the president of the Valencia region, said he was going to ask Madrid for €31.4 billion in aid.

Spain is still dealing with the aftermath of the Oct. 29 floods, which hit 75 cities and towns in Valencia and three towns in two other regions. According to the most recent government figures, the death toll is 217, although hundreds of people are still missing. Streets in flood-hit areas remain buried in mud, and more than 100,000 cars are thought to have been impacted. The storm represents one of Spain’s worst natural disasters in living memory.

On Saturday, Sanchez announced Spain’s biggest peacetime deployment of military and security forces to the flood-hit region. Around 15,000 troops were assisting in relief efforts as of Tuesday.

Response to the tragedy has been complicated by the fact that the regional administration in Valencia is led by a center-right party that represents the main opposition to Sanchez’s Socialists. Bickering between the central and regional governments have contributed to conflicting accounts over how alerts and rescue efforts were managed.

So far, the government of Valencia has pledged €250 million in aid. On Monday, the billionaire owner of the Zara clothing chain, Spaniard Amancio Ortega, announced a €100 million donation for flood victims.

Spanish banks have an exposure of about €20 billion to the Valencia region through mortages and loans, according to estimates by the Spanish central bank published Tuesday. “Exposure is relatively high but it is not a systemic event,” the Bank of Spain’s general director of financial stability Angel Estrada said Tuesday.

The financial package announced by Sanchez on Tuesday includes €838 million in direct aid to self-employed workers and companies in addition to as much as €5 billion in state-backed guarantees in the form of credit loans for companies and households, Sanchez said.

The government will also cover all emergency expenses paid by city governments in flood-hit areas and up to half of the costs of all urban reconstruction projects, he said.

Top photo: Emergency service workers search the Bonaire Shopping Center near Valencia. Photographer: Angel Garcia/Bloomberg.