Bankruptcies in Germany are soaring to their highest level in 20 years, with more and more companies being crushed under the country’s growing economic crisis.
A total of 1,530 individuals and corporations filed for bankruptcies in October, 17 percent more than last month, according to research from the Leibniz Institute for Economic Research Halle (IWH).
“This is the highest October value in 20 years,” writes IWH researcher Steffen Müller. In the current year, there have been at least 1,000 companies filing for bankruptcy every month, but now the 1,500 level has been exceeded for the first time, according to German newspaper FAZ. That is two-thirds more than the pre-pandemic era. Companies in construction, trade and business were hit especially hard.
One notable example in recent times is the bankruptcy of the Munich-based flying taxi startup Lilium, which ran out of funding in October after its budget committee decided against a guarantee for a KfW loan.
While the IWH cites the overall weak economic situation, including a decline of GDP of 0.3 percent in 2023 and another reduction of 0.2 percent this year, there are other factors, such as increasing input costs, high labor costs, a lack of skilled workers, weak international demand, and soaring energy costs.
Other companies are seeking to sharply reduce costs, including Volkswagen, which is looking to close three factories and cut up to 30,000 jobs. However, VW joins a long list of companies that are reducing workplaces in what some economists are calling the deindustrialization of Germany. Battles with unions are also expected, which could further exacerbate tensions.
The ruling left-liberal government has generally been perceived by the public and business community as a complete disaster for the German economy. Just yesterday, the government coalition collapsed, resulting in a minority ruling government. A vote of no-confidence will be called in January and new elections may come as soon as March; the minority government may continue on until the end of its term depending on how the no-confidence vote goes. However, the uncertain political situation is expected to only weigh further on the German economy.
