ECB’s Villeroy: Don’t See Any Tsunami of Corporate Bankruptcies

13 September 2021

By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member François Villeroy de Galhau on Monday again dispelled fears of a wave of French corporate bankruptcies.

‘The main direct economic effects of the crisis are without doubt behind us’, said Villeroy, who heads Banque de France, in an interview with French daily newspaper La Croix. ‘We must remain cautious, because the health crisis is not over, but the recovery is a little stronger and above all faster than expected.’

French growth would reach 6.3% this year, returning the economy to pre-Covid activity levels by year’s end, he said.

There was ‘no reason to fear’ a wave of corporate bankruptcies, he said. ‘Of course, there are weakened companies, with which we will be present on the ground; but we can say with confidence that there will not be a tsunami of bankruptcies.’

With respect to inflation, which was around 2% in France last month, authorities ‘are vigilant, but think that it will remain slightly above this level until the end of the year before returning in 2022 to around 1.4% once the rise in the price of raw materials (particularly oil) and electronic components has passed’, he said. ‘This is a typical phenomenon in times of recovery, but it should be transitory.’

Although currently low interest rates suppress the burden of the national debt, ‘nothing lasts forever and rates will rise again one day’, he said. ‘It would be irresponsible to bet that in ten or thirty years' time the burden will remain as low as it is today.’

As on other occasions, Villeroy decried the French economy’s mix of high unemployment and labour scarcity.

‘This is a socially unacceptable paradox, and it is our major economic drag’, he said. ‘Many other countries have recruitment difficulties, but they are almost at full employment! There are therefore no reforms more urgent and necessary than those that will increase the available labour supply.’