Extreme heat is set to impose significant economic burdens on Europe, particularly affecting productivity and public finances. A report by Allianz Trade highlights that by 2030, countries like France, Italy, and Germany could face cumulative GDP losses of up to 7%. This is largely due to reduced labour productivity as heatwaves hinder outdoor work and increase cooling demands.
As temperatures rise, productivity declines sharply; for every degree above 30°C, productivity drops by approximately 3%. This not only impacts workers in construction and agriculture but also leads to increased energy costs for businesses and households. The strain on energy systems can lead to higher electricity prices, as seen during past heatwaves.
The economic fallout extends beyond immediate productivity losses. Investment is expected to decline significantly, with fixed capital formation dropping by an average of 8% across affected nations. This could create a cycle of reduced growth and increased unemployment, complicating monetary policy for central banks in the eurozone.
Moreover, public finances will be strained as lower economic output leads to reduced tax revenues while governments face rising costs for healthcare and infrastructure repairs. Without comprehensive adaptation strategies, the most vulnerable populations may suffer disproportionately, highlighting the urgent need for government support to mitigate these impacts.
Source: Euronews
