Drought threatens the euro area economy
The lack of water is the most important natural risk to the euro area economy, according to the European Central Bank and researchers at Oxford University, Bloomberg reports.
The lack of surface water endangers almost 15% of the economic production of the euro area, said Frank Elderson on Thursday, a member of the ECB’s executive board. According to him, agriculture is the most exposed sector because it would suffer the greatest potential losses from the decrease of surface waters. Elderson also pointed to the risks associated with water pollution, as well as to floods.
The ECB is trying to get a clearer image of how climate change and risks related to nature will affect banks’ balance sheets, as well as the whole economy. Elderson has said that the spring of 2025 is about to become the most drought ever registered in the Netherlands, and periods of drought will become more common due to climatic seizures.
« As a result, efficient water management will become crucial for maintaining production, » said Frank Elderson, in a speech in Leiden. ‘However, the risk that during drought periods persists, the production may be reduced. Some industrial processes could become economically unviable and need to be moved, « Elderson added.
The ECB is to be published on Friday, on its blog, some of the preliminary results of the studies carried out jointly with the researchers at Oxford University, said the ECB official.
