[ad_1]
Zombie companies are companies that are at least ten years old but can not cover their costs with their profits. A report from the Bank for International Settlements (BIS) reveals that there are more and more companies of this type, which has considerable economic implications.
Low interest rates are to blame
According to the BIS report, low interest rates have led to the rise of zombie companies. Because low interest rates lead to the admission of high credit and reduce the pressure of debt.
Loans require zombie companies to pay at least part of their bills and stay afloat in the medium term.
In a research report, Deutsche Bank also attributed the low interest rates of the past decade to the rise of zombie companies.
The proportion of zombie companies has increased
In their study, the BIS experts take into account a total of 14 countries, including Germany. Between 1980 and 2016, the proportion of zombie businesses rose on average by ten percent.
The authors of the study pose a growing danger to the economy of these companies. Because of their low productivity, zombie companies hinder both employment and investment in other, more productive businesses.
The rise in interest rates is particularly dangerous
However, the biggest danger emanating from zombie companies is a rise in interest rates. Second, companies facing financial difficulties can no longer service their loans. In the worst case, this leads to a collapse of zombie societies and an increase in unemployment.
Eoin Murray of Hermes Investment Management told the US television channel CNBC that a rise in interest rates could lead to a recession. In the long run, this could lead to the disappearance of zombie companies and a positive evolution of the labor market.
In video: Trump attacks the Fed because of rising interest rates
Source link
