The European Union is doing the same as they did in 2008-09, extend and pretend, dishing out cheap loans to businesses and hoping for a recovery. What’s worrying today is that excessive optimism comes as European governments invest in the recovery by increasing public spending as the central bank keeps rates low and floods capital markets with liquidity.
The problem is that banks have high exposure to small business loans, which is the backbone of the continent’s economy. If these businesses fail, another round of economic pain is dead ahead.
WSJ interviews Miguel Ríos, who operates four karaoke bars in Barcelona, said the pandemic and resulting government shutdown of his businesses forced him to borrow nearly $100k and put ten of his employees on a government wage-support program. He said his bars had been shuttered for almost one year as he is on the brink of financial disaster, with piles of insurmountable debt. mehr hier