European firms are facing an unprecedented shock, but the policy response has also been unprecedented. This chapter seeks to quantify the potential impact of the coronavirus disease (COVID-19) crisis on corporate liquidity and solvencyrisksinEurope and examine the extent to which policy measures—as designed—could dampen these risks in 2020. Using detailed balance sheet and income statement data for millions of European companies, the chapter finds that job-retention programs, debt moratoria, grants, and loan guarantees could be effective in addressing
This chapter was prepared by Kamil Dybczak, Carlos Mulas Granados, and Ezgi Ozturk with inputs from Vizhdan Boranova, Karim Foda, Keiko Honjo, Raju Huidrom, Nemanja Jovanovic and Svitlana Maslova, under the supervision of Jörg Decressin and the guidance of Gabriel Di Bella. Jaewoo Lee and Petia Topalova provided useful advice and comments. Nomelie Veluz provided administrative support. This chapter reflects data and developments as of September 28, 2020.
Bertrand Gruss (co-lead), Carlos Mulas-Granados, Manasa Pat-nam (co-lead), and Sebastian Weber prepared this chapter under the supervision of Enrica Detragiache and the guidance of Jeffrey Franks. Zan Jin provided excellent research support.
The COVID-19 pandemic has caused dramatic loss of human life and major damage to the European economy, but thanks to an exceptionally strong policy response, potentially devastating outcomes have been avoided.