Rising temperatures and more frequent heatwaves could significantly slow economic growth across Europe over the coming years, with countries such as France, Italy and Spain among the most exposed, according to a new Allianz Trade report cited by EuroNews.
The insurer estimates that cumulative GDP losses could reach between 5% and 7% by 2030 in the most vulnerable economies, as extreme heat reduces productivity, increases energy demand and places additional pressure on public finances.
France Faces the Largest Economic Impact
According to Allianz Trade, France could suffer economic losses of approximately $240 billion (€209 billion) by 2030, making it the most exposed European economy.
Italy follows with projected losses of $147 billion (€128 billion), while Germany could lose $131 billion (€114 billion) and Spain around $120 billion (€104 billion).
The report assumes a gradual increase in extreme heat events between 2026 and 2030, culminating in conditions comparable to each country’s hottest years on record.
Productivity and Energy Systems Under Pressure
EuroNews notes that Allianz expects some of the biggest impacts to come from reduced labour productivity.
According to the report, productivity declines by roughly 3% for every degree above 30°C, while electricity demand increases by around 1.2% per additional degree as households and businesses rely more heavily on cooling systems.
Construction workers, factory employees, delivery drivers and agricultural labourers are among the sectors most vulnerable to heat-related disruptions.
The report also highlights growing pressure on Europe’s energy infrastructure. High temperatures increase electricity consumption while reducing the efficiency of power generation systems, particularly those dependent on water for cooling.
Risks for Public Finances and Growth
Beyond productivity losses, Allianz Trade warns that extreme heat could weaken investment activity, increase inflationary pressures and reduce tax revenues.
France could face annual tax revenue losses equivalent to 1.8%, while Italy and Spain could each lose around 1.3%. Fiscal deficits are expected to widen as governments spend more on healthcare, infrastructure repairs and climate adaptation measures.
According to EuroNews, Allianz also warns that some countries, including Italy and Spain, could face greater difficulty complying with European Union fiscal rules as climate-related costs increase.
While the European Union continues to pursue its Fit for 55 climate strategy and carbon neutrality targets for 2050, the report concludes that no major European economy is fully prepared for the long-term economic consequences of extreme heat.
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