The climate crisis is having particularly adverse consequences for the Greek economy and GDP. The longer the necessary measures are delayed, the worse the situation becomes—this is an issue that could take on “irreversible characteristics,” warned Nikos Vettas, Director General of Greece’s Foundation for Economic and Industrial Research (IOBE), during a presentation of six related studies assessing the negative economic footprint of the climate crisis in Greece.

Climate change is expected to influence household consumption both directly and indirectly, with serious implications for the Greek economy. These effects are driven by two main factors: first, a reduction in disposable income due to the loss of asset value (e.g., from natural disasters) or decreased labor productivity in certain sectors (e.g., agriculture); and second, a shift in the structure of consumer spending, with a greater share going toward sectors like healthcare and insurance.

Beyond their direct impact, these changes will trigger broader multiplier effects because of the interconnectedness of economic sectors.

The Losses
IOBE carried out studies to assess how the Greek economy would be affected by the impacts of climate change if Greece does not implement counteracting policies. The potential outcomes point to a significant decline in GDP and job losses. Two scenarios were constructed for this purpose.

The first scenario assumes a 5% reduction in income, reflecting estimates by the European Economic and Social Committee (EESC) regarding labor income loss in Greece. The second scenario uses the EESC’s estimate of a 10% decline in consumer spending in the country. Thus, Scenario 2 represents the most pessimistic version of the analysis, projecting twice the drop in overall consumption compared to the first scenario.

For every €1 lost in household income, GDP shrinks by more than €1.93

Spending, Income Loss, and GDP
The analysis shows pronounced economic impacts in both scenarios, due to the decrease in total household spending. In Scenario 1, with a 5% decline in consumer spending, the annual GDP loss reaches about €7.9 billion, or 3.5% of GDP. Of that, €4.1 billion stems directly from sectors experiencing reduced demand, approximately €1 billion is lost due to decreased activity in supply chain sectors, and around €2.8 billion reflects further declines in income and consumption resulting from broader economic downturn. The fact that every €1 of lost household income leads to more than €1.93 in GDP loss highlights the strong consumption multiplier in the Greek economy.

For every 1 job directly affected, a total of 1.7 jobs are impacted across the economy

Jobs
In terms of employment, reduced economic activity due to falling consumption corresponds to an estimated loss of around 161,000 full-time equivalent jobs. Of these, approximately 92,000 are the direct result of lower demand, while over 69,000 are due to indirect and induced effects. In other words, for every 1 job directly affected, 1.7 jobs are impacted overall due to sectoral interdependencies.

Public revenues are also expected to decline significantly if household spending drops by 5%. The total fiscal impact is estimated at -€2.5 billion, with about 60% of this (€1.5 billion) resulting from indirect and induced effects, and the remaining 40% from reduced activity in directly affected sectors.

The Disaster Scenario
In Scenario 2, where consumer spending drops by 10%, the economic impact increases accordingly. Specifically, GDP shrinks by nearly €16 billion—equivalent to 7.1% of total GDP. Roughly half of this loss originates from sectors directly affected by reduced household consumption, while the rest comes from indirect and especially induced effects.

The employment impact is similarly severe, with a projected loss of nearly 327,000 full-time equivalent jobs—6.7% of total jobs in the country. Of these, 55% are due to direct effects, with the rest coming from indirect and induced consequences.

Finally, regarding public revenue in Scenario 2, the projected losses follow a similar pattern to Scenario 1, with induced effects accounting for just over half the total. However, the overall figures are about double those of Scenario 1 due to the deeper decline in consumer spending, with total estimated public revenue losses exceeding €5.1 billion.

Source: OT