The head of Europe’s biggest debt collector says the historic wave of stimulus spilling out of central banks has failed to fuel investment growth.
Lars Wollung, the chief executive officer of Intrum Justitia AB, warned that record-low interest rates “don’t seem to lead to investments that create jobs,” in an interview in Stockholm.
“A rate that is too low, or a rate that many of us have never experienced, is so extraordinary that it doesn’t create any stability or faith in the future at all,” he said. “Rather the opposite: one feels insecure and waits with expansion plans and to hire more people.”
The comments mark a blow to central banks who have resorted to everything from negative rates to bond purchases to aid growth. A study by Intrum Justitia shows 73 percent of the almost 9,000 European firms surveyed between February and April said low interest rates brought about “no change in investments.” Some even reported a decline. In Sweden, where the central bank’s main rate is minus 0.25 percent, 82 percent of companies said it made no difference to their investments.
What companies need if they’re “to believe in the future” is certainty that their bills will be paid, Wollung said. That means clearer payments legislation and more incentives for borrowers to repay their debts on time, he said. Intrum Justitia has devoted resources to lobbying officials in Brussels in an effort to bring across its point, Wollung said.
In Germany and Scandinavia, where companies and borrowers can refer to clear and robust legal systems, unemployment is low and economic growth strong, he said. A German firm waits 17 days on average to get paid by a client company. In Italy, it takes 80 days, Intrum figures show.
The survey indicates that about 8 million European companies would hire more people if they got their payments faster.
“Late payments are a significant problem for companies,” Wollung said. Having a stable cash flow is “probably more important than if interest rates are at 1 percent or 0.5 percent,” he said.