Frankfurt:The European Central Bank (ECB) has issued a warning that an extreme water scarcity event could jeopardize up to 24% of the euro area's economic output. This significant risk was highlighted in an article published in the ECB's Economic Bulletin.
According to Wam, the ECB's research indicates that 72% of companies in the euro area rely heavily on ecosystem services. Furthermore, nearly 75% of banks' corporate lending is directed towards firms that depend on at least one such service. To achieve the EU's climate objectives, the ECB estimates that an additional green investment of about 3% of the EU's GDP will be required annually until 2030. The public sector is expected to cover 20%-25% of these investment needs, with the remainder financed by private capital.
The ECB also referenced a study by the Kiel Institute, noting that low water levels in the River Rhine in July 2026 led to a reduction in Germany's real GDP growth by approximately 0.2 percentage points during the third quarter.
Furthermore, the ECB expressed concerns over a growing insurance protection gap, pointing out that less than a quarter of losses from natural catastrophes in the EU are insured. In several member states, coverage is below 5%. The ECB reported that extreme climate-related events caused an estimated £900 billion in direct economic losses across the EU from 1981 to 2023, with over a fifth occurring in the last three years of this period.
Additionally, the ECB noted progress in reducing its carbon footprint, reporting that its carbon dioxide emissions in 2025 were 46% below 2019 levels.