German insolvencies ‘rising sharply’ as economy remains in stagnation | Personal Finance | Finance

Company insolvencies in Germany are significantly increasing month on month as the economy remains in a state of stagnation in a worsening headache for Chancellor Olaf Scholz.

In July 2023, insolvencies registered a notable increase of 23.8 percent compared to the same month in 2022. This upward trend in insolvencies has remained consistent since August 2022.

Journalist Holger Zschaepitz commented on statistics drawn from June on X, formerly known as Twitter: “Good Morning from #Germany, where the number of corporate insolvencies is rising sharply.

“In June, 1548 comps went bankrupt, +36 percent YoY. In H1 2023, German district courts reported 8,571 corporate insolvencies filed. That was 20.5 percent more than in the 1st half of 2022.” [sic]

Observers are already drawing comparisons to the late 1990s and early 2000s, a period when the nation was often referred to as “the sick man of Europe” due to its slow economic growth.

The German economy is projected to contract by 0.4 percent in 2023 – the only major European nation experiencing negative growth.

Such a contraction has lowered the European Commission’s (EC) economic outlook, which stated in a new report that output across the bloc will only rise by 0.8 percent this year, in contrast to the previous forecast of 1.1 percent.

According to the EC’s report, the Summer Economic Forecast 2023, Germany’s economic slowdown can be attributed to factors including real wage declines, weakened exports, and reduced public consumption resulting from the impact of COVID-19.

Germany has been hit particularly hard by the war in Ukraine due to its heavy reliance on Russian energy imports.

Ralph Solveen, an economist at Commerzbank, told Reuters: “If the government does not take decisive action, Germany is likely to remain at the bottom of the growth table in the euro area.”

However, Germany is not the only European country struggling with insolvencies.

In France, the number of business bankruptcies increased 35 percent in this year’s second quarter compared to the same period last year.

In England and Wales, following seasonal adjustment, there were a total of 6,342 company insolvencies in the second quarter (Q2) of 2023.

This figure marks the highest level since 2009, indicating a nine percent increase compared to Q1 of 2023 and a 13 percent rise compared to Q2 of 2022.