{"id":55049,"date":"2020-09-15T08:54:03","date_gmt":"2020-09-15T13:54:03","guid":{"rendered":"https:\/\/olduvai.ca\/?p=55049"},"modified":"2020-09-15T08:54:03","modified_gmt":"2020-09-15T13:54:03","slug":"whats-to-be-done-now-with-all-these-zombie-companies","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=55049","title":{"rendered":"What\u2019s to Be Done Now with All These Zombie Companies?"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"https:\/\/wolfstreet.com\/2020\/09\/15\/next-big-challenge-according-to-european-banks-and-think-tanks-saving-the-zombies\/\">What\u2019s to Be Done Now with All These Zombie Companies?<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><strong>Saving the Zombies in Europe.<\/strong><\/p>\n<p>Europe\u2019s zombie firms are multiplying like never before. In Germany, one of the few European economies that has weathered the virus crisis reasonably well, an estimated 550,000 firms \u2014 roughly one-sixth of the total \u2014 could already be classified as \u201czombies\u201d,\u00a0<a href=\"https:\/\/www.dw.com\/en\/zombie-firms-will-a-wave-of-insolvencies-hit-germany\/a-54629676\">according to<\/a>\u00a0research by the credit agency Creditreform. It\u2019s a\u00a0<a href=\"http:\/\/www.laliberte.ch\/news-agence\/detail\/la-vague-de-faillites-se-fait-attendre-creditreform\/576440\">similar story<\/a>\u00a0in Switzerland.<\/p>\n<p>Zombie firms are over-leveraged, high-risk companies with a business model that is not remotely self-sustaining, since they need to constantly raise fresh money from new creditors to pay off existing creditors.\u00a0<a href=\"https:\/\/www.bis.org\/publ\/qtrpdf\/r_qt1809g.pdf\">According to<\/a>\u00a0the Bank for International Settlements\u2019 definition, they are unable to cover debt servicing costs with their EBIT (earnings before interest and taxes) over an extended period.<\/p>\n<p>The number of zombie companies has been rising across Europe and the Anglosphere \u2014 due to of two main factors:<\/p>\n<ul>\n<li>Central banks\u2019 easy money forever policies, which brought interest rates down to such low levels that even firms with a reasonable chance of default have been able to continue issuing debt at serviceable rates. Many large zombie firms have also been bailed out, in some cases more than once. Spanish green energy giant\u00a0<a href=\"https:\/\/wolfstreet.com\/tag\/abengoa\/\" target=\"_blank\" rel=\"noopener noreferrer\">Abengoa has been bailed out three times in five years<\/a>.<\/li>\n<li>The tendency of poorly capitalized banks to continually roll over or restructure bad loans. This is particularly prevalent in parts of the Eurozone where banks are especially weak, such as Italy.<\/li>\n<\/ul>\n<p>A Bank of America report from July\u00a0<a href=\"https:\/\/www.telegraph.co.uk\/business\/2020\/07\/13\/uk-becomes-zombie-business-capital-europe\/\">posits<\/a>\u00a0that the UK accounts for a staggering one third of all zombie companies in Europe. They represent 20% of all companies in the U.K, up four percentage points since March,\u00a0<a href=\"https:\/\/www.ukonward.com\/payingitforward\/\">according to<\/a>\u00a0a new paper by the conservative think tank Onward. In the two hardest-hit sectors \u2014 accommodation and food services, and arts, entertainment and recreation \u2014 the proportion of zombie firms has soared by 9 and 11 percentage points respectively, to 23% and 26%.<\/p>\n<p>\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>What\u2019s to Be Done Now with All These Zombie Companies? Saving the Zombies in Europe. Europe\u2019s zombie firms are multiplying like never before. In Germany, one of the few European economies that has weathered the virus crisis reasonably well, an estimated 550,000 firms \u2014 roughly one-sixth of the total \u2014 could already be classified as [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[124,281,2326,29428,27230,855,4255,28767],"class_list":["post-55049","post","type-post","status-publish","format-standard","hentry","category-economics","tag-central-banks","tag-europe","tag-government-stimulus","tag-lockdowns","tag-nick-corbishley","tag-viral-pandemic","tag-wolfstreet","tag-zombie-businesses"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/55049","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=55049"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/55049\/revisions"}],"predecessor-version":[{"id":55050,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/55049\/revisions\/55050"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=55049"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=55049"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=55049"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}