The growth of corporate debt risks turning into long “years of pandemic pain for Europe”, writes Bloomberg .
Businesses were forced to resort to loans and bonds, which became available thanks to government guarantees and incentives from central banks. When this crisis support ends, there will be a risk of a wave of defaults and bankruptcies, analysts promise. All of this will hit the banking sector and exacerbate the economic downturn.
Debt burden can hinder investment and job creation for years to come. There has never been a crisis of this magnitude with systemic risks, experts say. Eurozone companies have borrowed more than 400 billion euros in the first half of this year, compared with 289 billion euros for the entire 2019.
The European Commission warned that servicing debt could be challenging, especially in sectors affected by the coronavirus pandemic. Paying off debt accumulated during the pandemic is the second biggest problem for businesses, experts say.
The US economy is also is under threat due to the so-called companies- zombies who have already amassed $ 1.4 trillion in debt. Of the country’s 3,000 largest public companies, at least 200 have joined the zombie ranks since the start of the pandemic.