Natural disasters have a high fiscal cost, while prolonged heat can hurt tourism
Lisa Tzouka/Reuters Breakingviews
Being in Sicily and driving in 45 degrees Celsius while forest fires are raging and smoke is everywhere doesn't sound like a relaxing holiday. However, these are the conditions experienced by many tourists, including the writer, on this island in July. Meanwhile, unprecedented high temperatures and drought have caused devastating fires in (neighboring) Greece, forcing thousands of visitors to abandon popular summer destinations such as Rhodes. The extreme weather conditions may have been limited to the countries of the European South, but their fiscal implications put the whole continent in a state of emergency. Hot summers are not unusual for Mediterranean countries. However, increasingly frequent heatwaves and forest fires are causing multi-layered economic damage.
So far and just since the beginning of the year, more than 2,300,000 acres have turned to ash, much more than the average of 1,600,000 acres in the summer season during the period 2006-2022. Heat and drought are expected to reduce this year's EU cereal output to 256 million tonnes, 10% below the five-year average and the worst harvest since 2007, according to the Farmers' Union. and Agricultural Cooperatives of the EU, Copa Cogeca. Recurring heat waves also threaten tourism. Rising temperatures could cut the number of summer visitors to southern coastal areas by 10% as they head to more northerly shores, EU research shows.
Such a blow is serious for Greece, because tourism was equivalent to 11.5% of GDP in 2022, but also for Italy and Spain, where the percentage exceeds 6%. As a result, housing prices will be permanently affected, while transport, electricity and telecommunications infrastructure will need upgrading. So additional fiscal pressures will be created in these countries, which are already struggling with high public debt. Damage from climate disasters, if the temperature rises above 1.5 degrees Celsius compared to pre-industrial levels, will increase the debt-to-GDP ratio by 2.6 percentage points in Greece, by 2.2 in Italy and 4, 5 am in Spain in 2032. A coordinated and pan-European effort is needed. As happened with the coronavirus, in the case of heat waves, they are affected disproportionately and without the fault of specific countries of the South. If Greece, Italy and Spain are left to face such a climate nightmare, finally, in addition to their other economic issues, there is a risk that they will find themselves in the position of Sisyphus.
