Zombie Companies Littering Europe May Tie the ECB's Hands for Years

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The ECB's dovish tone last week -- pushing back the timing for a decision on the future of its bond-buying program until possibly October -- confirms it will embark on a gradual pace of tightening in order to juice the economic recovery, according to Bank of America. It reckons the ECB's taper will start in January 2018, with the first increase to the deposit rate projected in the spring of 2019, compared with consensus expectations for a hike in October 2018, according to overnight index swap contracts compiled by Bloomberg.

Similar studies confirm zombie firms litter the landscape across developed markets, and place the blame squarely on loose monetary policy. Last month, the Bank for International Settlements calculated businesses more than 10 years old whose earnings don't cover interest expenses represent almost 10.5 percent of publicly listed companies across 13 advanced economies, compared with less than 6 percent pre-crisis.