« Zombie » firms: how many, and how dangerous are they?

The term « zombie » firm is anything but new i n the economic literature , dating back at least to the 9 0’s of the last century . The economic disruptions caused by the pandemic and the massive financial assistance provided by government s have rekindled the interest in “zombie” firm s, which can be understood as companies that are “liv ing dead ” and only surv ive thanks to continuing funding from bank s , despite an unfavorable economic outlook . We aim in this report to assess how high the share of these companies in the big four euro area economies is . We also show that low profitability, relatively low interest rates and a weak ened banking system have been the main drivers of the “zombi fication ” of an increasing number of firms . Last but not least, we try to figure out the impact of the pandemic on the “zombification” process of companies going forward in an macro economic environment that is characterized by a combination of a drop in activity and profits , but also by significant state loans guarantees. Th e potential increase in the “zombie” share will be weighing on the long-term economic outlook in so far as “zombie” firms are generally less productive than their peers.