Europe's Economy Hit by Extreme Weather: 43 Billion Euros in Losses and Rising Costs

A recent economic study revealed that extreme weather events in Europe during the summer of 2025—including heatwaves, droughts, and floods—have cost the continent a staggering 43 billion euros in direct losses. However, according to experts, this is just the beginning, as long-term costs are expected to multiply significantly.

Direct and Indirect Costs

The study, led by Swarsh Osman from the University of Mannheim in collaboration with researchers from the European Central Bank, estimated the losses using meteorological data and advanced economic models. The analysis included direct costs, such as damage to infrastructure and agricultural crops, as well as indirect costs, which are considered to be more impactful. These indirect costs include:

• Productivity losses: Halting factory production due to damage or the time needed for reconstruction.

• Human costs: The loss of human lives.

• Adaptation costs: Expenses related to climate adaptation efforts, such as installing new air conditioning systems.

• Inflation: Rising agricultural product prices due to scarcity or crop damage from droughts.

Based on these factors, the study projects that the total costs from the 2025 disasters could surge to 126 billion euros by 2029, confirming that the economic impacts of climate change far exceed immediate damages.

Most Affected Countries

Spain, France, and Italy are the most affected countries, with each facing losses exceeding 10 billion euros in 2025 alone. These losses are projected to surpass 30 billion euros in the medium term, as these nations have experienced a surge in heatwaves and droughts this summer.

Central and Northern European countries have suffered fewer damages, though recent floods indicate that the total cost of weather-related disruptions is increasing across the continent.

Researchers note that the figures in the study may be an underestimate for several reasons:

• Exclusion of cumulative effects: The study does not fully account for events like concurrent heatwaves and droughts.

• Neglecting certain phenomena: Other phenomena like wildfires were not considered.

• Focus on physical assets: Reinsurance companies typically only calculate physical damage, ignoring indirect effects like productivity losses.