"This is the worst natural disaster our generation has seen," Austrian Chancellor Wolfgang Schuessel said in Berlin after a crisis summit with leaders from other flood-hit nations agreed on an aid package.

Although the water has started to subside in Germany's historic city of Dresden, towns further downstream the swollen Elbe and Mulde rivers are being swamped as swirling murky, water breaches sodden flood defences.

Officials said the situation was critical in Torgau, where the water from the Elbe reached its high point on Sunday after about 10,000 people were evacuated. In Wittenberg, workers hastily built new defences after one dam burst, but the historic town centre, on higher ground, did not appear at immediate risk.

As the Danube river rose rapidly in Hungary, residents bolstered defences between the Slovak border and Budapest, where authorities hoped the worst would be over by Yesterday morning. Officials said they believed the city's 10-metre (32 ft 10 in) high barriers would hold.

The European Commission agreed at the crisis meeting, called by German Chancellor Gerhard Schroeder and attended by leaders from Austria, the Czech Republic and Slovakia, on a package of aid to help repair the devastation wreaked by the record floods.

Although they put no figure on the value of the package, some estimate the overall costs in Germany alone at more than 10 billion euros (dollars). European Commission President Romano Prodi confirmed the European Investment Bank would also offer stricken countries millions of euros in loans.

"This is a moment in which we have to show that true European solidarity exists," Prodi said.

STATESMAN SCHROEDER

With five weeks to go to a general election, Schroeder is taking every opportunity to demonstrate his firm handling of the crisis and show he is compassionate about disaster - or at least better qualified than rivals to deal with it.

Schroeder said the extra funding needed to combat the devastating damage would not push Germany's budget deficit above the three percent of gross domestic product (GDP) limit all members of the euro zone promise to adhere to.

But he again expressed irritation at being asked about Germany's adherence to the EU Stability and Growth Pact as it tries to fund the clean-up operation, preferring instead to concentrate on the human side of the catastrophe.

His challenger in the leadership race, Edmund Stoiber, whose conservatives are ahead in opinion polls, was caught off guard when the floods struck but rushed back from holiday to don rubber boots and wade through mud like the chancellor.

Stoiber said on Sunday Germany should not make new borrowings to fund the clean-up.

"I would not fight a catastrophe with a long-term evil," he told German television. "Not sticking to the Maastricht criteria, going into debt, of course means high inflation in the long term."

As the politicians discuss money, many in Germany still have more immediate concerns.

Thousands were evacuated from Bitterfeld, in formerly communist East Germany, amid fears of an environmental disaster if water from a burst dam reached the nearby chemical plants.

A spokesman for chemicals giant Bayer in Bitterfeld said the company's plant remained dry and said even in the event of a dam burst, there was no immediate risk of flooding for its factories although one other area could be hit.

Further downstream, authorities in the northern region of Mecklenburg-Vorpommern said they may have to evacuate 30,000 people.