Europe's growing space cooling needs

Erste Bank Research Team Erste Bank

On the radar

Inflation in Romania eased to 10.4% y/y in June, slightly more than expected.
In Serbia inflation declined to 2.7% y/y in June surprising to the downside as well.
Today Czechia and Poland will publish current account data. Poland at the top will release data on trade balance alongside export and import growths.

Economic developments

Today we look at energy use for space colling amid news that France's state-owned energy group EDF temporarily shut down three nuclear reactors on Sunday and warned that seven others may need to adjust their power output due to heatwaves and war rivers. Nuclear power stations rely on river water for cooling and electricity output may need to be reduced when water temperatures become too high. While total energy use by EU27 households declined slightly in 2024 (latest available data) compared to 2015, energy use for space cooling has been gradually rising and has at least doubled over the last decade across the EU27. In the CEE region, demand for space cooling has also increased, albeit at a more moderate pace. Nevertheless, energy use for space cooling in CEE still accounts for only around 7% of the European total, reflecting the region's most likely lower cooling needs and lower penetration of air-conditioning equipment. The upward trend in cooling demand is likely to persist as heatwaves have become more frequent and more intense.

Market movements

Tensions in the Middle East have intensified, with Brent crude oil prices rising to USD 85 per barrel after President Trump reinstated restrictions on Iranian vessels transiting the Strait of Hormuz. Moreover, President Trump pledged to continue US attacks on Iran, further increasing geopolitical uncertainty. Against this backdrop, CEE currencies weakened, with EUR/HUF moving towards 359 and EUR/PLN rising to 4.33. As for other global developments, US inflation data are due to be released today and will be closely watched by markets.

Locally, Hungary passed legislation leading to the removal of President Sulyok, who was widely perceived as a loyalist of Prime Minister Viktor Orbán. However, the Hungarian presidency is largely a ceremonial and representative office. In Romania, the political deadlock persists as parties remain unable to agree on the formation of a new government. The Social Democratic Party (PSD) has withdrawn its support for key reform bills required to unlock EU funding under the Recovery and Resilience Facility and has conditioned its backing on the resignation of interim Prime Minister Bolojan. Despite the political uncertainty, Romania successfully placed bonds maturing in 2030 at Monday's auction.

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Erste Bank Research Team

Erste Bank

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