Countermeasures Slow Wave of Coronavirus Bankruptcies in Germany
There is currently no sign of a wave of coronavirus-related bankruptcies in Germany. The suspension of the obligation to file for insolvency and the liquidity assistance provided by Germany’s federal and state governments have prevented it, according to the latest estimates from the ifo Institute. These are based on historical correlations between the state of the economy, corporate profits, and insolvencies. “As a result of the slump in corporate profits last year, outstanding claims should actually have been almost EUR 120 billion,” says Timo Wollmershäuser, Head of Forecasts at ifo. “Liquidity support has cut the expected level of defaults in half to about EUR 60 billion.”
Wollmershäuser adds: “The main reason the remaining EUR 60 billion of defaults haven’t yet materialized is because the federal government has suspended the obligation to file for insolvency. By the end of October, creditors had filed claims with the courts amounting to EUR 44.5 billion. That sum includes the EUR 12.5 billion declared in the Wirecard scandal – which has nothing to do with the coronavirus or collapsing profits.”
The federal government recently extended its suspension of the filing obligation for companies once again, from January 31 to April 30. “However, merely suspending the obligation to file doesn’t address the true causes of insolvency, it just postpones the consequences of the crisis,” Wollmershäuser explains. “Nevertheless, the emergency and bridging aid provided by the federal and state governments will have certainly helped stabilized production potential. This should noticeably flatten the impending wave of insolvencies and accelerate the post-lockdown economic recovery.”
Publication (in German)
ifo Economic Forecast Winter 2020: The Coronavirus Strikes Back – Another Lockdown Slows the Economy for a Second Time
München, 2020
ifo Schnelldienst, 2020, 73, Sonderausgabe Dezember 2020, 03-61
