Thursday, May 3, 2012

Drought in Spain and Italy Adds To Economic Woes

The weak economies of Spain and Italy are being battered by Mother Nature. In addition to the debt and  unemployment crisis in these countries, the agricultural sector is also being hit by freakish weather. In Spain, a spring spell of cold and wet weather, coming on the back of the driest winter in over 50 years, reduced crop yields. The continuation of Spain's long-running drought has cut the country's capacity to irrigate crops and generate hydro power. Scarcity of hydropower makes Spain more dependent on gas-fired generators and increases spending on imported natural gas.

Much of Italy is also suffering from drought. As shown in the image below, most of the country is in drought conditions. If the drought worsens significantly this summer, it will a huge drag on the economy due to: 1) reduced income for farmers: 2) reduced employment for farm hands, and 3) higher food costs.

Source: Global Drought Monitor

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