The Role of Public Administration and Economic Policy in Preventing Bankruptcies: A Macroeconomic Perspective

Abstract

The paper assesses the important issue of whether bankruptcies could be prevented by public administration and economic policy, using the experience of the European Union during the COVID-19 pandemic. The fiscal and monetary interventions discussed in the study include some significant drivers: an increase in the survival rate of firms in the short run, stabilization of employment, and resilience of the economy over the long term. Due to the fact that some of these economies are not developed, over time, various challenges set in, such as the piling up of long-term debt, abuse of funding provided to SMEs, and market distortion. The paper emphasizes specific strategies aimed at overcoming the problem: economic growth through high-productivity investment, access to finance for SMEs, and efficiency in the market through innovation. These, thus, constitute strategies toward the establishment of a more robust economy that would be able to weather future crisis situations while promoting sustainable growth. It also underlines the need for coordinated economic policies that can provide a number of lessons that are useful both for policymakers and enterprises while trying to minimize the risk of bankruptcy associated with downturns in the economic cycle.