Euro-zone companies’ search for resilience contributes to lower growth

After the subprime crisis, euro-zone companies tried to become more resilient, i.e. to be better-placed to weather a future crisis. This will be the case again after the COVID crisis. This is leading them to: Build up liquidity (cash) reserves, including by borrowing and raising equity; Reduce their risk-taking, leading to weak investment, especially in new technologies; Offshore production to low-labour-cost regions to improve their profitability; Prefer flexible forms of employment contracts. Such choices among companies, aimed at making them more resilient to crises, may lead to a loss of potential growth, as funding is used to accumulate cash and not to invest, the effort investment is insufficient, production is offshored and the accumulation of human capital is impeded by employees being hired on short-term contract .