Frankfurt:The European Central Bank (ECB) has issued a warning that extreme water scarcity could jeopardize up to 24% of the euro area's economic output. This cautionary note comes as the ECB highlights the critical dependence of the region's economy on ecosystem services.

According to Anadolu Agency, the ECB's research indicates that 72% of companies within the eurozone rely heavily on ecosystem services. Additionally, nearly 75% of corporate lending by banks is directed towards firms that are vulnerable to at least one ecosystem service.

The ECB estimates that achieving EU environmental objectives will necessitate green investments amounting to approximately 3% of the bloc's gross domestic product annually until 2030. The public sector is expected to cover 20% to 25% of these investment needs, with the remainder relying on private capital.

The report also draws attention to the physical impacts of environmental changes, such as the low water levels on the river Rhine in July 2026, which reduced Germany's third-quarter real GDP growth by about 0.2 percentage points. Furthermore, the ECB has raised concerns about a growing insurance protection gap, noting that less than 25% of natural catastrophe losses in the EU are insured, with coverage falling below 5% in some member countries.

From 1981 to 2023, extreme weather events have resulted in direct economic losses of approximately £900 billion ($1.01 trillion) across the EU, with more than one-fifth of these losses occurring in the past three years. The ECB has internally reduced its carbon dioxide emissions by 46% in 2025 compared to 2019 levels and has incorporated environmental factors into its Eurosystem collateral framework for marketable corporate assets this year.