Europe’s economic recovery is threatened by the corporate debt overhang created in the wake of the pandemic. Even as vaccines roll out, Europe faces the prospect of a prolonged retrenchment as indebted firms pull back investments and repair their balance sheets.
Insolvency
procedures have gradually improved over the past decade in Europe, but
decisive and swift public action is needed to take advantage of these
reforms. Given the scale of the crisis, Frederico Mollet argues in
favour of a comprehensive European restructuring strategy. EU member
states and the Commission must step in to provide the resources,
guidance, and coordination necessary to push through this monumental
restructuring.
This strategy would furthermore benefit from
common European guidelines and criteria for creditors and debtors. It
will not only increase the likelihood of success but also protect the
level playing field.
Lack of a clear strategy and coordinated
approach will result in a drawn-out restructuring process that pushes
too many viable firms into liquidation and permanently hampers the
economic recovery. Centring on private restructurings would also
minimise the use of public funds at a time when governments have to deal
with multiple competing fiscal pressures.
Read the full paper here.
EPC
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