Christine Lagarde: A warning from Europe's hot summer
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Blog post by Christine Lagarde on Europe's extreme summer. The economic impact has been small and temporary, but the costs of climate change are growing and could push up food inflation. She proposes more insurance protection and a more flexible electricity system.
Key points
- ECB staff estimate a small and temporary effect on euro area activity
- The drought worsens the agricultural outlook and could push food inflation higher next year
- Almost 12% of euro area GDP is exposed to insufficient flood protection; only a quarter of catastrophe losses have been insured
- In Spain, the hours in which gas sets the electricity price have fallen from close to 80% in 2020 to just over 20% in 2026
- Priorities: financial protection (European public-private reinsurance proposed by the ECB and EIOPA), electrification and a more flexible grid
Who is affected
Insurers, energy sector, EU climate policy
Plain-language version
Christine Lagarde, president of the ECB (the euro area's central bank), writes about the extreme summer. The economic damage was small, but drought could push up food prices next year, and only a quarter of disaster losses were insured. She calls for more disaster insurance and a more flexible power grid, as in Spain, where gas now sets the electricity price far less often.
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