ECB Warns Water Crisis Could Threaten 24 Percent of Eurozone Economy

(MENAFN) The European Central Bank (ECB) warned Monday that an extreme water shortage could expose as much as 24% of euro area economic output to potential losses, highlighting the growing financial risks posed by environmental pressures.

According to ECB research, approximately 72% of companies across the eurozone rely heavily on ecosystem services, while nearly 75% of bank lending to businesses is directed toward companies dependent on at least one such service.

The central bank estimates that achieving the European Union's environmental targets will require additional green investment equivalent to around 3% of the bloc's gross domestic product each year through 2030.

Public funding is expected to account for only 20% to 25% of the overall investment requirement, meaning private-sector financing will need to provide the bulk of the necessary capital.

The report also pointed to the economic consequences of physical climate-related disruptions in 2026. Low water levels along the Rhine River in July, for example, reduced Germany's real GDP growth in the third quarter by approximately 0.2 percentage points.

The ECB further cautioned that insurance coverage against natural disasters remains insufficient across the bloc. Less than 25% of losses caused by natural catastrophes in the EU are insured, with the proportion dropping below 5% in several member states.

Between 1981 and 2023, extreme weather events generated approximately €900 billion ($1.01 trillion) in direct economic damage across the European Union, with more than 20% of those losses recorded during the final three years of the period.

Meanwhile, the ECB reported progress in reducing its own environmental footprint, cutting carbon dioxide emissions by 46% in 2025 compared with 2019.

The institution also incorporated environmental factors into the Eurosystem's collateral framework for marketable corporate assets this year.

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