11/01/2013 09:24 GMT | Updated 13/03/2013 05:12 GMT

The Year of the Zombie?

In his new year message, David Cameron was of the opinion that things can only get better in 2013. Angela Merkel was less sure, warning the German people to prepare for another hard year. Five years into the financial crisis besetting Europe it is worth asking where we are and if things are getting better. The omens are not good. Indeed, 2013 might well turn out to be the year of the zombie!

Analysis of the financial crisis has already drawn on horror films to capture the excesses of the behaviours that caused it. Initially, this focused on a creature renowned for its blood-sucking behaviour, the vampire. It was vampire firms (investment banks, hedge funds, private equity outfits) and their rapacious leaders who were accused of sucking the life-blood out of the economy for their own ends.

It was the image of the chief executive of Goldman Sachs, blood dripping from his fangs, that came to symbolise all that the Occupy Wall Street protesters loathed and feared. Goldman Sachs was famously described as a great vampire squid. But Goldman Sachs is only one very "successful" example of this kind of behaviour. Other self-destructed. HBOS, for example, started on its path to destruction when it appointed someone from the shadowy world of investment banking as its Chief Executive.

Where are we now? The world was looking to vampire slayers to provide leadership out of the crisis and to lay the vampires to rest. Alas, the current living dead state of the economy is not a strong basis for hope. The vampire slayers proved ineffectual. Politicians like David Cameron and Nick Clegg come to resemble the heroines of Bram Stokers' tale of Dracula - attractive but ineffectual, believing that they are the ones who can tame the vampires, but running the risk of becoming victims themselves.

The failure to ring-fence the activities of banks' rapacious investment banking arms continues to hold back investment in the real economy. The Van Helsing (Stoker's vampire slaying hero) of government ought to have been Vince Cable, but his room for manoeuvre was drastically reduced by his mistakes in trying to wage war on News Corp.

We hear less of vampires these days. The new creature dominating the scene is the zombie. The banking crisis has left economies that are "zombified", living dead, only kept "alive" by the injection of the life-blood of credit by central banks.

Not everybody likes the term zombie, not least because it does not sit well with an optimistic view of the future. The Governor of the Bank of England, reflecting on our economic crisis, said he did not like the use of the term "zombie companies". Yet some members of the Bank's own Monetary Policy Committee have used that concept to describe the possibility that the injection of cheap credit into the economy has created living dead companies that should be dead but are surviving by absorbing too much of the credit available in the current low interest regime. Zombies are thus limiting the growth of other companies with real life potential.

There is still the pervasive fear that some banks will have to fail and that these zombie banks will eventually have to be put down, dragging the economy even further into their mire. We face a perfect zombie storm, zombie companies, zombie banks and zombie households barely surviving because of the availability of low rates of interest that cannot last. Add to these zombie economies of which Greece is a sad example. If we accept the zombie hypothesis we are haunted by the living dead and are likely to remain so for some time yet.