Europe’s heat wave could lead to structural economic risk

Europe's extreme heat wave is weighing on economic activity across the continent, particularly in Germany, the bloc's largest economy.

Heat waves, become more frequent because of climate change, are no longer viewed as temporary occurrences but as structural macroeconomic risks that threaten investment and production, economists and international organizations warn.

Recent record-breaking June temperatures across the continent saw France, the UK, Switzerland, and Germany experiencing their hottest June in recent years. The heat in France revived memories of the heat wave in the summer of 2003, which is estimated to have caused around 70,000 deaths.

Hospitals in several European countries reported critical conditions due to malfunctions in cooling systems and IT infrastructure, while France temporarily shut down two nuclear reactors.

Carsten Brzeski, head of macro research and chief economist for Germany at ING, said in a Monday article on ING Think that record-breaking heat waves across the continent evolved from isolated weather events to a macroeconomic variable, shaking the bloc's economy in a way reminiscent of COVID-19 lockdown restrictions.

Brzeski stated that empty streets, closed schools, disrupted rail services, and shut down nuclear reactors in France because of cooling water shortages leave lasting marks on human health and on the European economy.

"Thermometers, it turns out, have become a leading indicator of economic growth," he said. "Heatwaves pose a new downside risk to European growth."

He said heat-related risks were once viewed as a southern Europe problem, but data now suggest Germany will rank third in the continent in cumulative heat-related economic losses by 2030.

"Not because German summers will rival Seville's, but because infrastructure, housing stock and labor-intensive sectors like construction and logistics were built for a cooler climate and haven't caught up," he said.

Brzeski cited a January 2026 Climate Analytics report commissioned by the World Bank, which found Germany lacks comprehensive measures to manage heat-stress and said that "adaptation planning was lagging well behind the science." He added that European Commission business surveys increasingly indicate weather as a limiting factor to production. "It actually shows that over the last few summers, Spain and Germany experienced the most disruptive effects of summer heatwaves," he added.

Brzeski said lower energy prices may provide some relief to households and firms but the extreme heat is still a major obstacle to growth as potential supply disruptions amid falling water levels, infrastructure problems affecting rail and road transport, and losses in labor productivity are on the horizon.

"A 2021 study of Europe's worst heat years (2003, 2010, 2015 and 2018) put continent-wide GDP (gross domestic product) losses from reduced labor productivity alone at 0.3-0.5% (output, not GDP growth), exceeding 1% in the most exposed regions," he said.

"Other studies add the costs of cooling and consequently calculate an even larger impact on growth. Add rising healthcare costs, emergency infrastructure repairs and the impact of heatwaves and drought on waterways, transportation or agriculture, and the negative impact on the economy grows further still," he added.

Economics expect the biggest inflationary effects of extreme heat to be felt in agriculture and food prices as drought reduce crop yields.

Previously, the ECB (European Central Bank) had also estimated that heatwaves and drought could push up food inflation by some 0.4-0.9 percentage points, with that effect potentially doubling over the next 30 years," he noted.

Brzeski stated that extreme heat poses a structural economic risk in Europe and added that Germany is facing a risk of cumulative GDP loss of $131 billion in 2026-2030, according to an analysis by Allianz Trade on May 28.

Temperatures above 30 degrees Celsius (86 degrees Fahrenheit) can potentially cause an economic damage totaling $240 billion in France $147 billion in Italy, and $120 billion in Spain by reducing productivity and driving up energy costs, but Germany in particular is expected to pay the heavy toll.