Europe Faces Bankruptcy ‘Tsunami' Search

The eurozone is at risk of a “tsunami” of bankruptcies as COVID life-support schemes for businesses are wound up, regulators have warned and  The Telegraph reported. A report by the EU's key risk watchdog, which is chaired by European Central Bank president Christine Lagarde, said that companies may struggle to stay solvent the longer they relied on emergency financial support. This could cause debt to accumulate, increasing the risk of a pent-up wave of insolvencies. Companies in the bloc have claimed a total of €1.5 trillion (£1.3 trillion) in grants, tax deferrals and loans during the pandemic, the European Systemic Risk Board (ESRB) said. The report said: “In a worst-case scenario, the postponed insolvencies would suddenly materialize and trigger a recessionary dynamic, potentially causing further insolvencies. The current low rate of insolvencies would then be similar to the sea retreating before a tsunami.” The number of bankruptcies across Europe fell by almost 20pc between July and September last year, compared with before the pandemic. But the ESRB cited forecasts from Allianz and Euler Hermes predicting a 32pc jump in insolvencies across western Europe this year and an even bigger 34pc rise in central and eastern Europe as the support measures are rolled back. The gloomy message echoes research from Bank of America on “ghost bankruptcies” warning that more than 200,000 companies across France, Germany, Spain and Italy are under threat when the lifelines are withdrawn