In some ways, zombie firms are an unintended side effect of years of easy money from the ECB, which rolled out aggressive stimulus policies, including negative interest rates, to support lending and growth. Those policies have been sharply criticized in some richer eurozone countries for making it easier for banks to keep struggling corporate borrowers alive.
It also ties up bank capital that could have been funneled elsewhere, including nearly €10 billion ($11.65 billion) in Italy and Spain from 2008 to 2013, according to the OECD. The misallocation of capital in those two countries “is higher today than at any point in time before the crisis,” ECB executive board member Benoît Coeuré said in June.
The ECB said in late October it would extend its giant bond-buying program through next September, likely pushing back the date of any interest-rate increase until at least 2019.
A small group of central-bank officials opposed the decision, including Jens Weidmann, president of Germany’s Bundesbank.
In a speech in September, Mr. Weidmann cited an academic study that concluded a bond-buying program by the ECB in 2012 had helped stabilize banks in southern Europe and boost lending but resulted in more loans to weak companies by the same banks. There was no positive impact on employment or investment, the study found.
“Some of these zombie companies are getting financed at [interest rates of] 2% because banks are trying to throw good money after bad,” said Basil Karatzas, a shipping-industry consultant in New York. The shipping industry has been pummeled by an oversupply of ships funded with cheap debt.
Economists say zombie firms are partly to blame for Europe’s productivity decline in recent years. Cement production in Italy peaked at 47 million tons in 2007 and has since fallen about 60%.
Yet there were 24 cement producers in Italy at the end of last year, down from 29 in 2007, according to the Italian Cement Association trade group.
Many Italian cement companies are limping along with help from “financial doping,” said Francesco Caltagirone Jr. , chief executive of Cementir Holding SpA, one of the country’s largest cement makers.