European Zombification Becomes Even Scarier

As with Japan in the 1990s, years of low — and even negative — interest rates in the eurozone have led to suspicions that the region’s business landscape is harbouring a load of zombie firms, the Financial Times reported. That is, companies that are being kept artificially alive by the repeated extension of credit. Many have tried to place the blame on the European Central Bank’s aggressive easing for the phenomenon, which critics say stymies longer-term growth prospects because it keeps capital and labour locked into inefficient parts of the economy and chokes innovation. The central bank, meanwhile, has said other factors are at work, such as structural shifts in the economy, which are leading to lower profitability regardless of where interest rates are. Read more

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