How Insolvent Companies Become Zombies

NTD Newsroom
By NTD Newsroom
August 21, 2020NTD Business

Germany’s justice minister wants to extend the country’s pandemic insolvency waiver.

This lets companies keep operating even if they can’t pay their debts as they fall due. Usually, companies need to report that so their creditors can try to get their money.

Instead, the German government pledged unlimited money to help companies survive. Its finance minister’s calling it a big bazooka, but where there’s a positive there’s a negative and the danger with this is funneling taxpayer money into insolvent companies that were in trouble even before the pandemic. These become zombie companies.

I asked Daniel LaCalle earlier why Americans should be concerned. He’s chief economist at Tressis.

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