Extreme weather, among other factors, may drive the European company into a recession. This was the opinion of economist Carsten Brzeski of the leading Dutch bank ING.
Climate change has led to a worse than usual summer in the region, punctuated by blistering heat and severe drought in Europe’s primary agricultural zones and highly destructive wildfires in others.
Brzeski believes that, along with the impact of the ongoing war in Ukraine, a weakening Euro, record inflation, and the political crisis in Italy, climate change has severely affected businesses throughout the continent and may seriously hamper economic growth in the near future.
One specific area directly hit by the summer heat has been the European supply chain, particularly in Germany. The Rhine, a primary conduit for transporting several key commodities, has dried up considerably this season. Indeed, the river’s water level is so low that shipping activities have been disrupted, further complicating supply chain issues.
Deutsche Bank Research analyst Eric Heymann stated that, given current environmental conditions, not all ships traversing the Rhine might be loaded to full capacity. Indeed, Germany’s Federal Institute of Hydrology believes that low water levels will make shipping companies think twice about completing trips if their ships are ferrying less cargo than usual.
Meanwhile, France’s natural water resources are heating up, impeding the operations of its already hampered nuclear power plants. Likewise, Italian farmers doubt if they will reap a good harvest this year as extreme weather conditions have affected crops like wheat and soybeans, as well as the production of export-grade products like Parmesan cheese.
Issues on Top of Other Issues
As with the rest of the world, surging inflation is one of the most pressing issues affecting the European economy. Likewise, nations are struggling to deal with the rising cost of food, fuel, and other basics among nations where the euro is the primary form of currency.
Inflation in the region hit an all time high of 8.6% in June – an event that prompted the European Central Bank (ECB) to call for an aggressive intervention last week.
However, given how Europe’s total industrial output shrank earlier this month, any initiatives from the ECB may be sorely limited. Indeed, S&P Global Market Intelligence’s chief business economist Chris Williamson opines that he expects the regional economy to contract within the third quarter, in which case, the economy will be in worse shape come the fall and winter months.