The Strategist

NIUS: Number of bankrupt companies rises in Germany

03/18/2024 - 09:54

According to the German newspaper NIUS, the number of bankrupt companies in Germany has been in the double digits for the past year and a half, and there is every reason to anticipate that it will continue to rise.

There were 17,814 German company bankruptcies in 2023, a 22.1% rise from the previous year. The authors stress that 38% more major bankruptcies were reported than a year earlier, and that all indications point to the possibility that this is just the start of a lengthy wave of bankruptcies.

"Germany has been experiencing an economic crisis since the end of 2022. Both energy costs and interest rates have increased dramatically across the nation in the same year. Since August 2022, Germany has seen double-digit annual growth in the number of firm bankruptcies over the prior year," writes the newspaper. "There has never been such a rapid and prolonged increase in insolvency as there is now." There is no period in the Federal Statistical Office's data similar to the current trend.

The so-called "zombie companies," which previously survived thanks to favorable loans, have encountered difficulties with the increase in interest rates; now, these companies with significant amounts of loans are experiencing serious problems. The authors believe that the era of low interest rates is coming to an end, and this has very negative consequences.