Abstract
This paper assesses the prospects of a 2021 "time bomb" in small-and medium-sized enterprise (SME) failures triggered by the generous support policies enacted during the 2020 COVID-19 crisis. Policies implemented in 2020 do not on their own create a 2021 time bomb for SMEs. Rather, business failures and policy costs remain modest. By contrast, credit contraction poses significant risk. Such a contraction would disproportionately impact firms that could survive COVID-19 in 2020 without any fiscal support. Even in that scenario, most business failures would arise not from excessively generous 2020 policies but rather from the contraction of credit to the corporate sector.
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