每日英語跟讀 Ep.K072: Europe’s Bankruptcies Are Plummeting. That May Be a Problem.
France and other European countries are spending enormous sums to keep businesses afloat during the worst recession since World War II. But some worry they’ve gone too far; bankruptcies are plunging to levels not seen in decades.
While the aid has prevented a surge in unemployment, the largesse risks turning swathes of the economy into a kind of twilight zone where firms are swamped with debt they cannot pay off but receiving just enough state aid to stay alive — so-called zombie companies. Unable to invest or innovate, these firms could contribute to what the World Bank recently described as a potential “lost decade” of stagnant economic growth caused by the pandemic.
“We need to get off of all of these subsidies at some point — otherwise, we’ll have a zombie economy,” said Carl Bildt, co-chair of the European Council on Foreign Relations and a former prime minister of Sweden.
Bankruptcies fell 40% last year in France and Britain, and were down 25% on average in the European Union. Without government intervention, including billions in state-backed loans and subsidized payrolls, European business failures would have almost doubled last year, according to a study by the National Bureau of Economic Research, a private American organization.
By contrast, Chapter 11 bankruptcy filings in the United States rose in the third quarter to the highest level since the 2010 financial crisis, a trend that is expected to continue in 2021, according to an index compiled by the U.S. law firm Polsinelli.
Those statistics are shaping a debate over whether Europe’s strategy of protecting businesses and workers “at all costs” will cement a recovery, or leave economies less competitive and more dependent on government aid when the pandemic recedes.
Analysts say the government programs are already seeding the economy with thousands of inefficient businesses with low productivity, high debt and a high prospect of default once low interest rates normalize.
An estimated 10% of companies in France were saved from bankruptcy because of government funds, according to Rexecode, a French economic think tank.
Letting unviable businesses go under, while painful, will be essential for allowing competitive sectors to thrive, said Jeffrey Franks, the head of the International Monetary Fund’s mission for France.
A wave of bankruptcies “is not something that’s necessarily so bad,” he said. “It’s part of the normal creative destruction process of regenerating economies.”
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