Bankruptcies in Germany rise sharply

Germany has experienced an increase in corporate bankruptcies as 5,209 companies filed for insolvency in the first quarter, according to the Federal Statistical Office, Destatis.

The first three months of this year saw a 26.5-percent increase in bankruptcies compared to the same period last year and an 11.2-percent increase compared to 2020 before pandemic-related closures.

Experts told the German press agency dpa they believe the number of corporate insolvencies in Germany would likely rise to approximately 20,000 cases this year, following a consistent long-term trend.

In May 2024, there was a 25.9-percent increase in regular insolvencies compared to the previous year, marking a continued trend of double-digit year-on-year growth rates since June 2023, as reported by government statisticians.

Due to the impact of the COVID-19 pandemic, high energy prices, and increased interest rates, a growing number of companies in Germany are facing financial difficulties, noted dpa.

In addition, government measures aimed at preventing a surge in bankruptcies during the pandemic have ended.

The transport and warehousing sector had the highest insolvency rate per 10,000 companies, with 29.6 cases in the first quarter of 2024, Destatis said.

The construction industry experienced 23.5 cases in the first three months of the year, followed by other economic services like employment agencies with 23 cases. Manufacturing saw 20.3 insolvencies per 10,000 companies.

Local courts reported total creditors' claims from corporate insolvencies by the end of March amounted to approximately 11.3 billion euros ($12.1 billion), a significant rise from 6.7 billion euros in the preceding year, reported the Deutsche Welle news service, or DW.

Additionally, there were 17,478 consumer bankruptcies in the first quarter of 2024, showing a 4.8-percent uptick from the same period in 2023.

According to Destatis data from last year, insolvency applications increased by 22.4 percent in October 2023 compared to the same month in 2022.

Germany's export-driven economy has faced significant challenges in recent years due to the slowdown in the global economy.

Recovery hopes for Europe's biggest economy had appeared to receive a boost with separate data released earlier this month showing a notable increase in German exports.

However, in a post on the X social media platform, Carsten Brzeski, the chief economist at Dutch bank ING in Germany, described the latest figures on bankruptcy as "another cold shower for optimists".

Germany last week led objections following the European Union's decision to implement increased tariffs on Chinese electric vehicle imports. The move has sparked discord within the EU Parliament, with Germany joined by Sweden and Hungary in opposition to the tariff hike, reported the Financial Times newspaper.

The German auto industry, renowned as one of the largest and most influential in the global market, plays a vital role in the country's manufacturing sector.