This year’s wildfires in southwestern Europe and the severe flooding that hit Spain in 2024 and Germany and its neighbours in 2021 show how climate damage is adding to a list of strains on Europe’s finances

International News via Reuters:

Someone will have to pick up the tab for the damage wrought by Europe’s increasingly volatile weather, and with the bulk of those economic losses uninsured, that will be the public purse unless immediate action is taken.

This year’s wildfires in southwestern Europe and the severe flooding that hit Spain in 2024 and Germany and its neighbours in 2021 show how climate damage is adding to a list of strains on Europe’s finances that already includes higher defence spending and rising costs associated with an ageing population.

“The problem is that they’re becoming more recurrent,” Federico Barriga-Salazar, head of Western Europe sovereign ratings at Fitch, said of catastrophes until now largely viewed as costly budget one-offs rather than as a regular expense.

“If a government is already fiscally tight, it means that it does create some policy trade-offs,” he said of the pressure that such economic losses put on other spending items.

If the current scale of the fiscal hit is arguably quite small, there is a growing acceptance it will only get bigger in a region which is the world’s fastest-warming continent.

Weather- and climate-related extremes caused economic losses of an estimated €822 billion ($953 billion) in the European Union between 1980 and 2024, according to the European Environment Agency — with a quarter of that damage inflicted in just the last four years.

Public deficits across the euro zone already average around 3% of GDP. Barriga-Salazar cited estimates that the Spanish 2024 floods — Europe’s worst flooding event in five decades — imply reconstruction costs of 0.7 percentage points of output from 2024 to 2026.

Moreover, only a quarter of climate-linked catastrophe losses are insured in the EU, with coverage in some countries below 5%, the EU estimates. Some fear that level of insurance coverage will only get smaller as a proportion of overall costs as extreme weather events occur more regularly.

“I do think this just means the more you have these risks, the less they will be insured,” said David Zahn, head of European fixed income at Franklin Templeton. “This is a big issue, and it will impact some of the countries by 1% to 2% of GDP.”

Economic think tank Bruegel calculated that, while most of the 2021 flood damage was covered by insurance in Belgium, the low level of insurance coverage in Germany meant it had to draw on public funds of €30 billion for the bulk of damages.

ADAPTING AND SHARING RISKS

With the European Union due to release proposals for climate resilience and risk management this autumn, attention is focused on possible solutions.

Greece, whose tourism-dependent economy is notably exposed to the risk of heatwaves and wildfires, is looking at ways to boost insurance coverage while making water and energy infrastructure more robust in tourist hotspots.

Following huge floods in early 2026, Portugal has announced plans to introduce mandatory home insurance backed by a natural disaster and earthquake disaster fund and a solidarity mechanism to guarantee universal access.

A possible stopgap measure for some could be recourse to so-called catastrophe bonds under which investors can receive handsome returns but also lose part or all of their principal if a predefined event, such as a hurricane or earthquake, occurs.

Franklin Templeton’s Zahn noted that for the sovereign, this could amount to an expensive gamble: “If the event happens, it pays off immediately. But you could also have five years with nothing, and you just paid out 8% per year.”

Heather Grabbe, senior fellow at Bruegel, said governments needed to put in place arrangements more systematic than one-off emergency spending, which risks creating the perverse incentive for households and businesses not to take out insurance.

“All governments across Europe need to assess their exposure and make comprehensive plans to reduce future damage through adaptation investments, as well as pooling risks across borders,” Grabbe said.

Numerous studies highlight how early investments in making economies more resilient to climate change can over time save money – and avoid what a 2025 Oxford University study called an “adaptation investment trap”, where repeated climate disasters raise debt and so leave less money for protection measures.

Spanish Prime Minister Pedro Sanchez has argued that green investments worth 0.1% of GDP could prevent economic losses totalling eight times that, and avoid tax revenue losses amounting to three times the original investment.

The ECB has proposed a joint EU public-private reinsurance scheme pooling private risks from natural catastrophes, backed up by an EU fund for public disaster financing.

But the question is whether this summer’s heatwaves will generate the political will to take on some of the upfront costs of such action — both at government and EU level.

A European Commission spokesperson said the EU executive was looking into ways to address the climate insurance protection gap as part of a package of measures due to be adopted by the end of the year.

($1 = 0.8624 euros)

Additional reporting by Kate Abnett in Brussels, Aislinn Laing in Madrid, Andrei Khalip in Lisbon, Johann M Cherian in Bengaluru, Francesco Canepa in Frankfurt; Writing by Mark John; Editing by Hugh Lawson

De La Espriella said the impact included roughly 24.5 trillion pesos in buildings and 5.5 trillion pesos in infrastructure

International News via Reuters:

The economic losses from a powerful earthquake that struck Colombia last week are expected to reach 30 trillion pesos ($9.58 billion), Colombia’s President Abelardo De La Espriella said on Monday.

De La Espriella said the impact included roughly 24.5 trillion pesos in buildings and 5.5 trillion pesos in infrastructure.

“Just imagine the scale of the disaster,” De La Espriella said, noting that the figures were likely to change. “This is a preliminary figure that will be adjusted as we obtain more information and as the damage caused by this earthquake is assessed in each of the regions.”

The 7.4-magnitude quake toppled buildings in various parts of western Colombia, including the major cities of Cali and Pereira, killing 280 people, injuring more than 4,000, and leaving another 143 people missing. 

By comparison, the earthquakes that struck neighboring Venezuela on June 24 caused damage to housing and infrastructure estimated at $37 billion, according to an initial assessment by the United Nations Office for Disaster Risk Reduction published last month.

The Colombia quake is the first major crisis facing De La Espriella, who took office just days before and now must oversee relief and reconstruction efforts.

($1 = 3,131.6400 Colombian pesos)

Reporting by Luis Jaime Acosta and Nelson Bocanegra, Writing by Natalia Siniawski, Editing by Daina Beth Solomon

Six commodity ships transited the strait on Monday, of which three were exiting the Gulf and three were entering, Kpler shiptracking data showed, compared with the 10-day average of 11 ships

International News via Reuters:

Ship crossings via the Strait of Hormuz were still in single digits on Monday, despite rising slightly from the weekend, according to preliminary shipping data on Tuesday, amid a stalemate in U.S. and Iranian peace talks.

Six commodity ships transited the strait on Monday, of which three were exiting the Gulf and three were entering, Kpler shiptracking data showed, compared with the 10-day average of 11 ships. Three ships transited on Saturday while two moved through the waterway on Sunday.

There were no very large crude carriers (VLCC) or tankers carrying liquefied natural gas passing through.

Some vessels could be passing through the strait with their transponders switched off and they are not considered in the tally.

The very large gas carrier (VLGC) Xavia entered the strait via the Iranian route under ballast, meaning empty of a cargo, according to the data. VLGCs are typically used to ship liquefied petroleum gases such as propane and butane.

A medium-range fuel tanker and an intermediate-range tanker also entered the Gulf, the data showed, while a medium-sized LPG carrier, a Panamax bulk carrier and a Panamax-sized fuel tanker exited the Gulf.

BAB EL-MANDEB CROSSINGS

At the chokepoint of Bab el-Mandeb on the other side of the Arabian Peninsula, 19 commodity vessels transited on Monday, Kpler data showed, lower than a 10-day moving average of 26 and Sunday’s 33 crossings.

Out of the 19 ships, five were entering the Red Sea and 14 were exiting.

Of the 14 exits, one was the VLCC Norns laden with 2 million barrels of oil, according to the data.

Of the ships entering, two were the liquid tankers Admiral and Portofino, with the Portofino loaded with diesel bound for west of Suez markets.

Reporting by Trixie Yap; Editing by Christian Schmollinger and Tom Hogue

Brent crude futures climbed 35 cents, or 0.39%, to $91.22 a barrel by 0827 GMT. U.S. West Texas Intermediate crude futures were up 81 cents, or 0.96%, at $85.31 a barrel

International News via Reuters:

Oil prices rose for a third session on Tuesday as prospects receded for a deal to end the Middle East war, with Iran saying it would adopt a more offensive stance and the U.S. ruling out extending a ceasefire deal, heightening worries about prolonged energy supply disruptions.

Brent crude futures climbed 35 cents, or 0.39%, to $91.22 a barrel by 0827 GMT. U.S. West Texas Intermediate crude futures were up 81 cents, or 0.96%, at $85.31 a barrel.

Both contracts were on course for their third straight day of gains, with Brent touching its highest since July 30 during the session and WTI since July 31.

“Sentiment remained supported by US President Donald Trump’s decision not to extend the US-Iran peace agreement and continued security concerns in the Strait of Hormuz,” ING analysts wrote in a note.

Outward progress on peace talks and resumption of oil tanker traffic through the strategic Strait of Hormuz has halted, threatening to extend the conflict the United States and Israel launched with attacks on Iran on February 28.

Iran will shift to a “fully offensive” military posture as efforts have stalled towards a permanent end to the war, a senior Iranian official told Reuters on Monday, as Washington ruled out extending its temporary ceasefire pact.

“The lack of any kind of deal will have an impact on oil price expectations further out in 4Q and even in 2027,” said DBS Bank’s head of energy research Suvro Sarkar. 

A projectile struck a vessel transiting out of the Strait of Hormuz on Tuesday in the latest of the attacks that have kept crossings to the single digits, despite a slight rise from the weekend, tracking data showed.

Saudi Aramco has resumed oil loadings from inside the Strait of Hormuz, and is offering cargoes for loading via ship-to-ship transfers off Fujairah in the UAE. 

“It is probably in Iran’s power to fully halt the flow of oil out of the Strait of Hormuz whenever they find it suitable. Or they will soon have built the capability of that. Iran is for sure not just sitting still waiting for new US sanctions,” said SEB analyst Bjarne Schieldrop.

Iran has separately been negotiating with Oman an agreement on managing the Strait of Hormuz and says they are close to a deal. But Trump responded to those talks with a threat to bomb the Gulf state, a longstanding U.S. security partner.

Elsewhere in the Middle East, Yemen’s Houthis launched missiles in an attack on vessels they described as a Saudi military ship and four escorts in the Red Sea, their military spokesperson, Yahya Saree, said on the Telegram messaging app.

Reporting by Robert Harvey in London, Ishaan Arora in Bengaluru and Trixie Yap in Singapore; Editing by Clarence Fernandez, Christian Schmollinger and Saad Sayeed