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- Wildfires have been raging in Spain and France, amid a global surge in such blazes.
- Extreme heat in Europe is straining infrastructure, disrupting businesses and adding costs for cooling, health care, emergency response, transportation and agriculture.
- Economists warn heatwaves are becoming a macroeconomic risk, with potential hits to output, tourism, food prices, insurance and public budgets.
People are silhouetted against the setting sun in Berlin on June 19, 2026 in Berlin, Germany. A heat wave is currently affecting all of Germany. Florian Gaertner | Photothek | Getty Images
Europe’s increasingly extreme summers are becoming an economic problem, with more frequent heatwaves driving up costs, disrupting businesses and weighing on growth.
Huge wildfires have been raging in France and Spain, burning 300,000 acres and forcing the evacuation of 300,000 people. The scenes echo last year’s Los Angeles wildfires, when blazes overwhelmed firefighting resources, triggered mass evacuations and destroyed thousands of homes.
A World Meteorological Organization (WMO) report looking at Europe in 2025 noted the continent had “seen increased wildfire potential … with a growing number of larger fires and an extended fire season. Western Europe recorded its hottest June ever this year, per the WMO.
French Finance Minister Roland Lescure said on Monday that the latest wildfires were “like a clap of thunder” for the local economy.
But the fires are part of a broader economic strain across health care, cooling, transportation, agriculture, insurance and public budgets, caused by rising temperatures. Economists have also warned that repeated heatwaves — Western Europe is facing its third in six weeks — can drag on output by reducing productivity, disrupting supply chains, depressing tourism and pushing up food prices, turning summer weather into a recurring macroeconomic risk.
A French Civil Security Canadair CL-415 aircraft flies past flames burning a forest surrounding Cotignac, southeastern France on July 23, 2026 during a wildfire.Thibaud Moritz | Afp | Getty Images
“This is really a big economic challenge,” Georg Zachmann, a senior fellow at Bruegel, specializing in energy and climate policies, told CNBC’s “Squawk Box Europe” on Tuesday.
“We need really to do everything we can do to make sure that our systems are adapted early on, as much as possible, and the speed of climate change is slowed down as much as possible, so that we don’t get into a situation where our absorptive capacity for such risks is not exceeded,” Zachmann told CNBC’s Ritika Gupta.
Extreme weather hitting GDP
The increased intensity and frequency of extreme weather means Europe has to deal with the cost of cooling, healthcare, emergency infrastructure, transportation, and agriculture, ING’s Global Head of Macro Carsten Brzeski said in a report in June.
“The uncomfortable truth is that heatwaves have quietly graduated from ‘weather event’ to ‘macro variable,’” Brzeski said.
Heatwaves, droughts and floods during the summer of 2025 caused the European economy to lose some 0.3% of output, and the damage could grow to an accumulated 0.8% by 2029, due to lost productivity, supply chain disruption, and depressed tourism revenue, a 2025 joint paper from the University of Mannheim and the European Central Bank found.
Additionally, agricultural commodities such as cocoa, coffee and wheat are expected to be among the hardest-hit asset classes from the heatwave, as warmer and more volatile weather threatens crop yields and drives up food prices.
Meanwhile, extreme weather events such as Europe’s wildfires are likely to impact countries’ fiscal budgets, Zachmann said, as they pay for evacuations, firefighting, and infrastructure recovery.
“Just to give you one example, the 2025 fires in California might have cost some 40 to 60 billion in direct cost, and the indirect costs have been estimated to some 300 billion. So it’s really a big thing,” he added.
Zachmann said that disasters that strike at a random pattern cause inflation. “The prices substantially increase. The risk premium increases for people that want to build there in the future.”
Insurance companies also paid out $56.3 billion in losses for wildfires in the 2010s, six times more than the $8.7 billion they paid in the 2000s, a report from Allianz Commercial noted in June. The sectors hardest hit include utility and energy, real estate, construction, agriculture, and transportation.
ING’s Brzeski told CNBC a “bittersweet consequence” of the wildfires in France and Spain is that it likely will also lead to positive economic activity once the reconstruction begins, in common with other natural disasters.
More heatwaves, more weather disasters
With a heatwave underway in the region, experts have warned that it could exacerbate the fires.
Stefan Doerr, a professor of wildland fire science at Swansea University, told CNBC’s “Squawk Box Europe” on Monday that climate change and poor landscape management are playing a “major role” in contributing to the wildfires.
watch nowVIDEO05:16How can Europe better combat wildfires?Squawk Box Europe
Doerr said decades of agricultural land abandonment and centuries of human-shaped landscapes have left parts of southern Europe with dense, highly flammable vegetation that is more vulnerable to wildfires during extreme heat and drought.
“If we had a natural landscape, we would have actually, in some places, at least far less flammable forests,” he said. “This is man-made. It’s not that the plants are not natural, but the way the landscape looks now is entirely artificial.”
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