Heatwaves, drought and floods that defined the summer of 2025 inflicted losses of €43 billion on the European economy, according to a new study released today. The report stresses that these immediate costs are only the beginning, with the longer-term bill set to climb much higher.
The study, led by Sechris Usman of the University of Mannheim in Germany and co-authored by two European Central Bank economists, draws on meteorological data and economic modelling to estimate the damage caused by increasingly frequent and severe weather events linked to climate change.
It factors in both direct consequences, such as the destruction of roads, buildings or harvests by floods, and indirect ones including lost output during the reconstruction of factories, the economic impact of lives lost, and the costs of adapting to new conditions.
“The true cost of extreme events extends far beyond their immediate impact,” Usman noted. For example, drought-related crop failures can trigger inflation over the medium to long term by disrupting supply.
Based on these scenarios, the study estimates that the macroeconomic cost of the summer 2025 disasters could reach €126 billion by 2029.
Southern Europe hit hardest
Spain, France and Italy were the worst affected this year, each suffering losses exceeding €10 billion. Those figures could rise above €30 billion in the medium term, as the summer saw an unprecedented multiplication of heatwaves and drought episodes.
Central and northern European countries experienced lighter losses, but the study points to a growing risk from repeated flooding in recent years, which is expected to drive costs higher.
Figures likely understated
The authors stress that their estimates almost certainly understate the true scale of the problem. They do not account for the cumulative impact of repeated heatwaves and droughts, nor for some consequences of climate change such as wildfires.
Insurance data also captures only part of the picture, the study warns, typically focusing on damage to physical assets while omitting indirect costs such as reduced productivity during extreme heat.
CNA
