The European Central Bank warns Friday about the main economic risks of drought in Europe, threatening up to 15 % of the production of the euro zone in case of extreme episodes called to be more frequent with climate change.
Extreme drought episodes can lead to “cascade effects”: the lack of surface water reduces agricultural yields, slows production and increases costs, limits hydroelectricity and transport of rivers, among other examples cited. Another observation: the real or perceived fall in water quality has already caused a strong decrease in tourist visits in certain regions, generating economic losses estimated at more than 100 billion euros per year.
More than 1,300 billion euros on bank loans exposed to vulnerable sectors
In general, authors estimate that 72 % of companies in the euro zone depend critically on the goods that nature directly provides: drinking water, food (fish, fruits, etc.), wood, raw materials to medicinal plants. Agriculture is the most vulnerable sector in case of a long drought, with up to 30 % of the threatened production in the south, against about 12 % in Finland, according to The Note.
Southern Europe is the most affected, but the exhibition is also increasing in the center and northern Europe, according to this note published at a time when a drought is never seen for decades has been arriving from northern Europe for several weeks, ranging from Ecosse in the Netherlands. The authors, ECB economists, add that lack of water should lead to an increase in water and food prices, so nourish inflation.
Beyond that, they point out a risk of financial stability through the increase in the probability that breeding companies: more than 1,300 billion euros in bank loans are exposed to sectors strongly vulnerable to drought, it is explained.
Source: BFM TV
