Europe’s huge spending to keep businesses alive risks could cause economic growth to stagnate.


Bankruptcies fell 40 percent last year in France and Britain, and were down 25 percent on average in the European Union.

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.

The difference is the enormous sums European countries are spending to keep businesses afloat. But some worry they’ve gone too far; bankruptcies are plunging to levels not seen in decades.

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.

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.”

Source link

Orbem News

Leave A Reply

Your email address will not be published.