Water has become a scarce resource in large parts of Spain. Winter and spring rains gave a false sense of normalcy, but the intense heat and increased consumption have left reservoirs at critically low levels in several regions. The situation is especially critical in northern Spain and the Balearic Islands, where restrictions have already been implemented and the public is being asked to use water responsibly.
This scarcity not only affects domestic water supply and irrigation, but has also raised alarms in the financial sector. The Bank of Spain has indicated that water stress has become a risk factor for the economy, with a direct impact on inflation, lending, and the stability of key sectors such as agriculture and tourism. Therefore, the drought is no longer merely an environmental issue, but a problem that affects citizens' wallets and companies' finances.
Alert in the north and Balearic Islands
Water scarcity has triggered an official alert in several Galician river basins. The Official Gazette of Galicia published on August 14th the resolution from Augas de Galicia (the Galician Water Authority) activating a severe water shortage situation in the Baiona water supply subsystem, as well as in the Lérez and Anllóns rivers. This measure entails restrictions on non-essential uses, such as watering gardens or filling swimming pools, and strict monitoring of consumption. In municipalities like Vigo and Pontevedra, local councils have been asked to reduce their water usage by 15%.
The situation is not unique to Galicia. Greenpeace has warned that the reserves accumulated during the winter have evaporated due to the heat and overconsumption. In the Balearic Islands, the aquifers of Mallorca have fallen to 39% of their capacity in the middle of the tourist season, which is impacting water management in the most demanding destinations. Asturias is also suffering the effects, with livestock farmers relying on tanker trucks to supply their animals.
Water as a financial risk
The impact of the drought extends far beyond restrictions. The Bank of Spain has focused on water as both a strategic asset and a source of credit risk . According to Deputy Governor Soledad Núñez, water scarcity can reduce agricultural yields, increase input costs, and strain supply chains, ultimately affecting corporate balance sheets and loan repayment capacity. In fact, the European Central Bank estimates that 72% of non-financial companies in the euro area depend on ecosystem services, and a substantial portion of that dependence is linked to water.
Water scarcity shocks can generate greater economic losses than other climate phenomena due to their multisectoral nature. Furthermore, around 20% of bank loans in Spain are linked to activities sensitive to water degradation, such as agriculture, food production, and tourism. This compels financial institutions to integrate water risk into their credit analyses and resilience tests.
Measures to address the shortage
Greenpeace insists that drought cannot be managed solely with last-minute measures, but requires structural planning. The organization reports that 30% of drinking water is lost due to leaks in the pipes and that the overexploitation of rivers for agribusiness exacerbates the problem. Therefore, it demands the urgent repair of the water networks, the closure of illegal water intakes, and the guarantee of ecological flows.
In the financial sector, coordination between government agencies, businesses, and regulators is essential to channel capital toward solutions that reduce water vulnerability. Investment in irrigation efficiency, reuse, and digitalization not only protects the environment but also stabilizes the income of strategic sectors and improves the resilience of the Spanish economy in the face of an increasingly arid future.
The current situation in Galicia, the Balearic Islands, and Asturias serves as a warning of what may come if decisive action is not taken. The boundary between environmental and financial concerns has become porous, and water, which for decades was considered a stable resource, now influences everything from food prices to the stability of the banking system. It is urgent to move from reaction to prevention, with reliable data, investment in infrastructure, and management that prioritizes the common good over private interests.
