Extreme weather could reduce eurozone GDP by up to 5% over the next five years, similar to the financial crises and the COVID-19 pandemic.

A European Central Bank official has warned that heatwaves, floods and wildfires could severely damage eurozone GDP, with an estimated fall of up to 5% in a worst-case climate scenario. This impact would be comparable to the global financial crisis and the COVID-19 pandemic. An optimistic scenario, based on a rapid transition to carbon neutrality, could instead stimulate economic growth and control inflation. This highlights climate risks to financial stability.