Economist: Heatwaves Now Shaking Europe's Economic Growth

Extreme heatwaves sweeping across Europe are increasingly weighing on economic activity in various countries, particularly Germany, the region’s largest economy. Economists and international organisations warn that the heatwaves, which are becoming more frequent due to climate change, are no longer seen as temporary events but as a structural macroeconomic risk that could threaten investment and production. Record-breaking temperatures in June made it the hottest June in recent years for France, the United Kingdom, Switzerland, and Germany. The heatwave in France evoked memories of the summer of 2003, which is estimated to have caused around 70,000 deaths. Hospitals in several European countries reported critical conditions due to disruptions to cooling systems and IT infrastructure, while France was forced to temporarily shut down two nuclear reactors. Carsten Brzeski, ING’s Head of Macro Research and Chief Economist for Germany, wrote on Monday (29/6) that the record-breaking heatwave in Europe has transformed from a mere weather event into a macroeconomic variable shaking the region’s economy, reminiscent of the impact of activity restrictions during the COVID-19 pandemic. According to Brzeski, deserted streets, closed schools, disrupted rail services, and the shutdown of nuclear reactors in France due to a lack of cooling water are leaving long-term scars on both public health and the European economy. “It turns out the thermometer has become a leading indicator for economic growth. The heatwave presents a new downside risk for European growth,” he said. He noted that heat-related risks were previously considered a problem for Southern Europe, but the latest data suggests Germany could rank third in Europe for cumulative economic losses from extreme heat by 2030. “Not because German summers will be like Seville, but because infrastructure, housing, and labour-intensive sectors like construction and logistics were built for a cooler climate and have not yet adapted,” he stated. Brzeski cited a January 2026 Climate Analytics report commissioned by the World Bank, which found that Germany still lacks comprehensive measures to tackle heat stress, with adaptation planning lagging behind scientific developments. He added that European Commission business surveys increasingly cite weather as a factor limiting production. In recent summers, Spain and Germany have recorded the most significant disruptions from heatwaves. Although lower energy prices may offer some relief to households and businesses, Brzeski believes extreme heat remains a major obstacle to economic growth due to threats of supply disruptions, falling water levels, transport infrastructure damage, and declining labour productivity. He referenced a 2021 study estimating that the worst heatwave years in Europe—2003, 2010, 2015, and 2018—caused economic output losses of 0.3 to 0.5 per cent of GDP solely from reduced labour productivity, with losses exceeding 1 per cent in the hardest-hit regions. “If you add cooling costs, rising healthcare expenses, emergency infrastructure repairs, and impacts on transport, waterways, and agriculture, the negative economic impact becomes much larger,” Brzeski said. Economists predict the greatest inflationary impact from extreme heat will be felt in the agriculture and food sectors, as drought reduces crop yields. The European Central Bank (ECB) previously estimated that heatwaves and drought could drive food inflation up by 0.4 to 0.9 percentage points, with the potential for this impact to double over the next 30 years. Brzeski stated that extreme heat is now a structural economic risk for Europe. He cited an Allianz Trade analysis estimating that Germany faces a cumulative GDP loss of $131 billion for the period 2026–2030. Temperatures above 30 degrees Celsius are expected to cause economic losses of up to $240 billion in France, $147 billion in Italy, and $120 billion in Spain due to declining productivity and rising energy costs, though Germany is expected to bear a particularly heavy burden. Official data shows that heatwaves, once considered temporary and recoverable costs, are now causing long-term damage to the European economy by directly suppressing GDP output and triggering inflationary pressures through supply chain disruptions. “A joint paper from the University of Mannheim and the ECB last year also calculated the economic damage from heatwaves, droughts, and floods in the summer of 2025. According to the study, the European economy lost about 0.3 per cent of output, and cumulative losses could reach 0.8 per cent by 2029 due to lost productivity, supply chain disruptions, and declining tourism revenue,” Brzeski said. He added that the World Bank report calls for urgent measures to address the risks of declining worker productivity and infrastructure damage, including tax incentives to encourage private sector investment in building insulation, shading, and air conditioning systems. According to Brzeski, adaptation to extreme heat is no longer just an environmental policy but an economic necessity to maintain Europe’s productivity and competitiveness.