This summer’s extreme weather will leave a €126 billion dent in the EU’s economy by 2029, according to new research.
The study, led by Dr Sehrish Usman at the University of Mannheim in collaboration with European Central Bank (ECB) economists, found that heatwaves, droughts and floods affected a quarter of all EU regions in the summer of 2025.
These extreme weather events caused short-term economic losses of at least €43 billion this year, with total costs expected to rise to €126 billion by 2029. The immediate losses amounted to 0.26 per cent of the EU’s economic output in 2024, according to the study.
“The true costs of extreme weather surface slowly because these events affect lives and livelihoods through a wide range of channels that extend beyond the initial impact. Official estimates are often delayed,” Usman explains.
“Our framework uses up-to-date data and newly published evidence of regional impacts from our previous study to provide timely estimates of how extreme events in the summer of 2025 affected economic activity.”
The rapid analysis hasn’t yet been submitted for peer review, but is based on relationships between weather and economic data published in a separate academic study earlier this month.
Hidden costs can multiply over time
Unlike traditional estimates that focus solely on destroyed infrastructure or buildings, this research attempts to account for hidden costs that multiply and ripple out over time. That includes things like loss of tourism revenue, impacts on productivity or supply chain disruption.
In total, 96 regions experienced heatwaves, 195 suffered drought and 53 regions were impacted by floods. Each type of extreme weather impacts economic activity in different ways.
Heat reduces productivity, especially in the construction and hospitality sectors. High temperatures reduce the number of hours that builders can work, for example. According to analysis by World Weather Attribution (WWA), human-caused climate change is estimated to have tripled the death toll across 12 major cities from heatwaves in June this year.
Drought primarily impacts agriculture, devastating crops when it is prolonged and spelling trouble for supply chains and farmers.
Floods cause direct damage to infrastructure and buildings, but they also incur indirect economic losses from issues which can persist for months, such as disrupted supply chains. If a factory is destroyed by flooding, for example, costs include reconstruction but also lost production until it is rebuilt.
Which country took the biggest economic hit?
Mediterranean countries paid the heaviest price. In Southern European countries, like Spain, Italy, Portugal, southern France and Greece, there is a higher risk of drought and heatwaves.
Italy faced the most severe economic hit with projected losses of €11.9 billion in 2025, rising to €34.2 billion by 2029. France followed close behind with €10.1 billion in immediate damages and €33.9 billion before the end of the decade.
Spain was among the most affected countries where researchers identified all three types of extreme weather events. Its total estimated losses were €12.2 billion in 2025 and €34.8 billion by 2029.
Smaller economies, like Malta, Cyprus and Bulgaria, are particularly vulnerable. Although their total losses are smaller, they are a much larger chunk of these countries’ economic capacity. Each experienced short-term losses amounting to more than 1 per cent of their gross value added (GVA), a measure similar to GDP that shows how much value an economy creates.
Though damage is lower in northern and central European countries such as Denmark, Sweden and Germany, the frequency and magnitude of extreme weather events, especially floods, are increasing. The study’s authors warn that in Germany, for example, relative losses might be small due to the size of its economy, but absolute losses “are not negligible”.
In total, the immediate costs of this summer’s extreme weather events amounted to 0.26 per cent of the EU’s economic output in 2024. By 2029, that rises to 0.78 per cent - an “economically significant potential loss”, researchers say.
Actual economic damage could be higher than expected
The study’s authors stress that these estimates are likely conservative and could be the tip of the iceberg for climate costs in Europe this summer.
They didn’t account for compound impacts when extreme events occur simultaneously, such as heatwaves and droughts. They also don’t include hazards like wildfires, which broke records across Europe this year, or hail and wind damage from storms.
The costs of these climate catastrophes, they warn, “far exceed simple measures of damage and destruction”, which cover damage to physical assets that are frequently used by insurers.
The researchers say the study makes clear that extreme weather is no longer a distant threat; it is already shaping Europe’s economic development.
“Having timely impact estimates helps policymakers target support and adapt strategies while the effects of extreme events are still unfolding,” Usman says.
Alongside urgent reductions to emissions, they are calling for increased investment in climate adaptation, like heat protection in cities or improved water management policies. But they also point out that adaptation measures themselves are costly and not always the most productive use of public funds, and more precise economic analyses are needed to design policies that are both effective and socially equitable.
