Is corporate leverage a risk to the recovery?

The euro area economy i s set to accelerate in the coming months as vaccinations are now progressing fast and lockdown measures are softened. How forceful the rebound in activity will be depends also on the strength of corporate investment spending . Short-term i ndicators point to a lively rebound in investment spending. But a lasting recovery in investment spending is not a given , as t he pandemic h a s left deep traces in corporate balance sheets and corporate leverage has reached record highs . Th is could be a stumbling block for the recovery in investment spending . But when looking in more detail at corporate balance sheets , it shows that the increase in leverage pre-dominantly reflects a pre-cautionary motive on the side of companies. From this also follows that leverage is likely to be less of a problem than it would be in “normal” times.