500 million euros of losses in 96 hours: the economic impact of the volcano La Palma

The volcano of La Palma, one of the Spanish Canary Islands, has been expelling lava for more than 96 hours. The magma pierces, turning everything in its path into devastation. Tons of lava move forward, burying homes, schools, businesses and fields. The Canarian government estimates the economic impact of the volcano eruption at 500 million euros located in the Cumbre Vieja area of ​​the Spanish island of La Palma.

Miles of lava draw gloomy scenes. “We got what we can,” Juan González tells Infobae, one of the farmers, as his plantations are threatened by the La Palma volcano. “If the lava comes down here?” We find ourselves without a house, without a farm and if nothing else, ”says one of the producers. “With this, the whole harvest is lost.”

The farmers control the advance of the lava from a distance. The fear is that the water supply will be cut off. Julio Santafé, Juan’s neighbor, is already breathing a little more calmly, he has managed to save his goats. “We had to load the goats and run away. Like him, dozens of herders are trying to save all their animals before the lava sweeps their farms.

The tourism sector is also affected. The eruption cuts the resumption of hotel reservations after the Covid-19, at the very beginning of a rather intense period of arrival of international tourists in the Canaries. “There are people evacuated, there are hotels evacuated, there are rural houses, villas, which are destroyed, others which are not accessible”, they say of the Canarian tourist association.

The Spanish government is already considering a plan to ensure the economy of the island of La Palma, after declaring it a disaster area. “We are working on a specific labor protection mechanism for La Palma and the Canary Islands archipelago,” they said from the Canary Islands government. The idea is to be able to help all the workers and companies concerned.

What is certain is that the eruption of the volcano on the island of La Palma opened an unprecedented crisis in half a century which forced the Spanish government to review the protocols for action in the face of natural disasters. La Moncloa has started to design a specific plan to rationalize aid and adapt to the exceptional circumstances of the first terrestrial volcanic emission in Spain since 1971. The administrative formula is already on the table of the Spanish Minister of the Presidency, Félix Bolaños, who assumed the coordination of an early response to cover the damage caused. This will include rebuilding houses and infrastructure; tax measures for the individuals and businesses concerned; and specific labor measures and subsidies for fishing and agriculture, the main economic livelihoods of the island apart from tourism. The areas washed away by the lava will not be used for cultivation for decades and the possible arrival of lava in the ocean will alter the marine ecosystem.

La Moncloa is studying the details of the legislation that regulates the granting of grants in the event of an emergency or disaster. “We need to study it in detail and adapt to what happened in La Palma,” government sources explain. The lava has so far destroyed more than 150 hectares and completely or partially destroyed nearly 400 buildings. The evolution of the lava tongues, which have not yet reached the ocean, has forced the evacuation of more than 6,800 people to date. One of the first questions the government must resolve is whether the situation in La Palma, unprecedented in the past 50 years, goes beyond the provisions of current legislation. But as long as the rash lasts, it will not be possible to assess the damage.

One of the doubts is whether the amounts stipulated in the royal decree are sufficient to meet the needs of the victims. For example, the disaster regulations set a maximum amount of 15,120 euros for the total destruction of the habitual residence. In the event that the damage affects the structure of the habitual residence, in particular the family living units, the aid would not exceed 10,320 euros. And in no case would they be greater than 2,580 euros for the destruction or degradation of basic household goods of the habitual residence. For death or absolute and permanent disability “caused directly by the events that caused the emergency or public disaster”, 18,000 euros would be paid. The same rule provides that these amounts “may be revised” by the Minister of the Interior, after a favorable opinion from the Ministry of the Economy and Finance, “to adapt them to changes in the cost of living”.

In the event of natural disasters of this type, the countries of the European Union can also urgently request material resources from Brussels. via the EU Civil Protection Mechanism, which could deliver food in tents to La Palma in around 48 hours, according to a Commission spokesperson. The Twenty-Seven have the opportunity to request this support when they are overwhelmed by disasters such as earthquakes or floods; they did it during the pandemic, to ask for products like masks. Spain, for the moment, has not asked for anything through this program.

After the disaster, countries have the option of applying for financial assistance through the EU Solidarity Fund, which can cover the costs of emergency and recovery operations for public authorities. This mechanism, launched in 2002 after the floods that devastated central Europe, is not automatic and countries must meet strict conditions to apply for it. So far, it has been used in some 80 disasters – floods, forest fires, earthquakes, storms and droughts – and 24 different European countries have been helped with more than € 5 billion.

To activate, governments must send a request to the European Commission within 12 weeks of the disaster demonstrating that the direct impact exceeds 0.6% of the country’s gross national income or 1.5% of regional gross domestic product ( or 1% of GDP in the case of the outer regions, as is the case of the Canary Islands). In the case of the archipelago, the disaster is expected to exceed € 457.2 million, according to the 2021 threshold lists published by the Commission. If the request meets the criteria, the Commission proposes to the Council and the European Parliament the mobilization of aid, which is charged to the EU budget.

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