Bankruptcies of German companies increase in March

It has been reported that there are signs of an increase in company bankruptcies in Germany due to the downturn in the economy and rising interest costs.

According to the statement from the German Federal Statistical Office (Destatis), bankruptcy filings in March increased by 13.2 percent compared to February. In February there was an increase of 10.8 percent compared to the previous month.

Destatis reported that bankruptcy filings are often included in the statistics with a delay.

Despite the Covid-19 crisis, the Russia-Ukraine war and the consequent energy crisis in Germany, the partial suspension of the obligation to declare bankruptcy, the extension of short-time benefits, comprehensive state aid and the number of companies that failed in 2020, 2021 and 2022 were at a historically low level.

BANKRUPTCY IS EXPECTED TO INCREASE

Experts are now predicting more company bankruptcies in Germany this year due to higher production costs, rising personnel costs and a significant rise in interest rates.

Insurance company Allianz Trade expects a 15 percent increase in bankruptcies this year.

In Germany’s Halle Institute for Economic Research (IWH), in its April 6 bankruptcy trend report, it was reported that despite improving economic expectations, the number of companies going bankrupt in March reached the highest level of the last three years.

IWH stated that rising production costs due to expensive energy and materials, rising personnel costs, and significantly rising interest rates are a burden on many businesses.

Bankruptcy filings of companies and partnerships in Germany rose 24 percent to 959 last month, compared to March 2022, according to the IWH report. Thus, bankruptcies rose to the highest level since May 2020.

AFFECTS FAILURE IN THE SUPPLY CHAIN

While the war between Russia and Ukraine has led to higher energy costs in Germany, continued disruptions in international supply chains are making many imported intermediate goods more expensive to produce in the country.

After the Covid-19 crisis caused significant job losses in many sectors, the energy crisis, the lack of skilled employees and materials, and high inflation have negatively affected the German economy for months.

The tightening of the monetary policy of the European Central Bank (ECB) also increases the financing costs of German companies.

German unions are also demanding higher wage increases for workers in the face of unusually high inflation.