Report on the evaluation of the burden on firms arising from the repayment of state-guaranteed loans (PGE)

In most advanced economies, policymakers swiftly introduced support schemes for firms to help them bridge the shortfall in activity caused by the economic shock that followed the COVID-19 pandemic. Business support programmes have taken various forms: moratoriums on or write-offs of social security and tax debts, subsidised loans, and short-time working schemes. In France, the guaranteed loan scheme has reached a considerable scale, with around 130 billion in loans granted up to August 2020 (compared with 40 billion in Germany and 55 billion in Italy over the same period; see Falagiarda et al., 2020). The aim of this scheme is to enable firms to cope with short-term liquidity crises and thereby avoid inefficient bankruptcies.
Beyond the initial shock, the persistence of the crisis due to the second and third waves is forcing firms to further deplete their reserves of liquidity and equity. This is likely to lead, in the medium term, to a sustained wave of firm insolvencies. Furthermore, a number of firms risk finding themselves in a situation of ‘debt overhang’. Highly indebted firms are likely to forego even profitable investment opportunities due to the pressure to reduce their debt significantly — notably by cutting costs and staff numbers.