Hungary’s only nuclear plant sits on the Danube and uses river water to cool its reactors. The river has fallen so low that the plant’s pumps can no longer draw enough of it, so the country switched the plant off — and is now buying replacement electricity from its neighbors at a far higher price than it costs to make at home. That swap, repeated day after day through a heat wave, is what officials and economists in Budapest are warning will show up in the national accounts.

The shutdown is not a forecast or a contingency. The Paks plant, about 75 miles south of Budapest, went fully offline for the first time in its 44-year history, a consequence of sustained drought across central Europe. Officials said record-low Danube water levels had disrupted reactor cooling. Output had already collapsed before the final shutdown, falling to 965 megawatts on a Friday and then to 240 overnight, against a normal 2,000 megawatts. The plant accounts for 40% of Hungary’s electricity generation.

The immediate bill is for imported power. Hungarian politicians have put the cost of the energy crisis at 100 billion to 200 billion forints, roughly €273 million to €547 million, because electricity bought abroad is far more expensive than what Paks produces. Reuters has put the potential cost as high as $632 million. Those outlays land on a budget the government was already trying to consolidate.

The growth arithmetic is smaller but harder to undo. Paks contributes about half a percentage point to Hungary’s GDP, and an outage of roughly twenty days within a quarter could shave about 0.1 percentage point off quarterly output, according to Gábor Regős, chief economist at Gránit Capital Management. The distinction that matters: electricity Paks does not generate today cannot be generated later, so it is a permanent loss, whereas factories running below capacity can make up some lost production once power returns.

Industry is absorbing the shock in real time. The government is boosting power imports to cover part of the shortfall and has asked large industrial firms, including car and battery makers, to cut consumption voluntarily, while warning that mandatory reductions may follow. A crisis plan prioritizes cutting electricity to companies and treats household limits as a last resort — rail freight was halted at peak hours starting Monday, and decorative lighting on state buildings has been switched off.

Agriculture is the second front. The drought is expected to hit farm output hard, restraining growth and potentially pushing food prices higher — a complication for central bankers who had penciled in a third consecutive monthly rate cut in August. More than 100 cities and villages have been placed under water-use restrictions.

Currency markets moved first. The forint, one of the world’s best performers earlier this year, slid to a three-month low against the euro and posted its steepest monthly decline since October 2024 as the energy crisis unsettled investors. It has since given up only modestly, though its failure to recover has been read as a sign the market is still pricing risk. The trade picture is being squeezed from both sides: weaker industrial exports on one hand, larger and costlier electricity imports on the other, with global oil and gas prices — still shaped by the Iran conflict — determining how much damage lands on the current account.

This is a regional problem, not a Hungarian one. Romania shut both Candu reactors at its own Danube-cooled plant and is leaning more heavily on imported electricity, driving up prices already lifted by air-conditioning demand. Danube flow fell to 1,650 cubic meters per second in late July against a July average of 4,750, approaching the record low of 1,400 set in 1985. On the Rhine, Germany’s most important inland trade corridor, vessels are carrying significantly less cargo, requiring more ships to move the same volume at higher cost.

The politics are sharpening. Economy and Energy Minister István Kapitány has said a low-water pumping station costing roughly 10 billion forints could have prevented the shutdown, and has ordered an inquiry into why it was never built. Prime Minister Péter Magyar, who urged the public to conserve electricity and water, has partly blamed infrastructure gaps inherited from the previous government.

There is a path out, and it runs through the weather. By Tuesday evening the Danube had risen five centimeters and the plant’s last turbine was running steadily, reducing the odds of a total shutdown for now. Forecasters expect weak industrial figures for late July and worse for August, but see a chance of recovery starting in the autumn if a complete outage is avoided and manufacturers can lift capacity utilization to recoup lost production. Budapest, meanwhile, faces temperatures near 100 degrees Fahrenheit for days ahead with no rain in the forecast.

JBizNews Desk | Budapest

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