Extreme Heat Could Erase European Union Economic Growth

Extreme heat and drought across Europe this summer could erase the projected economic growth for the European Union and the Netherlands. Triodos Bank estimates a GDP reduction of approximately 1 percent to 1.1 percent, representing economic losses of roughly 180 billion euros. This decline matches the bloc's expected growth rate for the year.

Lost labor productivity is the primary driver of the decline, potentially cutting GDP by 0.6 percent. This impact is most severe in construction, agriculture, and physically demanding sectors, as well as in non-air-conditioned offices. Agricultural output is projected to drop between 3 percent and 7 percent.

France is expected to suffer the most significant hit, with a potential GDP reduction of 1.4 percent, which could lead to an annual contraction of 0.6 percent. Italy, Spain, and Belgium are also projected to face heavy losses, while Poland is expected to be less impacted.

Additional economic damage stems from higher food and electricity prices and constrained power generation. Specific disruptions include the shutdown of a nuclear power plant in Hungary due to low Danube water levels and transportation failures across roads, rail, and inland waterways in Germany and the Netherlands.