How do companies deleverage?

One of the major risks for the euro-zone economies after the coronavirus crisis is how companies will react to their much higher debt than before the crisis: will they curb wages and employment and reduce their investment? After the subprime crisis, the corporate debt ratio was reduced in all the large OECD countries except the United States and France. We therefore look at how companies in the other countries deleveraged. We find that: Wages slowed in Spain and Japan; Employment slowed in Spain and Italy; Corporate investment fell in Spain and Italy. There is a risk that these developments will repeat after the coronavirus crisis.