Germany: Corporate bankruptcies rise to global financial crisis levels

A prominent German researcher has said that corporate bankruptcies in Germany have risen to levels similar to those during the 2008 financial crisis.

“We’re in the range where some months could easily reach 20-year highs,” said Steffen Müller, head of bankruptcy research at the Halle Institute for Economic Research.

“At the time of the financial crisis, we had about 1,400 insolvent partnerships and companies per month, and now we have reached that level again,” Müller added.

He noted that the number of small companies going bankrupt at that time was similar to the number of large companies going bankrupt, but today it is about 500 small companies, which are those with up to 10 employees, adding that in light of the bankruptcy of more larger companies, this means the loss of more economic assets.

A report issued by the credit agency Credit Reform last December confirmed this trend, showing that bankruptcies among German companies in 2024 reached their highest level since 2015.

In total, around 121,300 bankruptcies were registered in Germany in 2024, including individual bankruptcies and others, which means an increase of 10.6% compared to 2023.

“The crises of recent years are now hitting companies with a certain lag in the form of bankruptcies,” said Patrick-Ludwig Hantzsch, head of economic research at Credit Revor.

“This means that bankruptcy numbers could soon be on a par with the record levels of 2009 and 2010, when more than 32,000 companies went bankrupt,” he added.

As for Steffen Müller, “Some of these bankruptcies are due to the residual effects of the coronavirus pandemic and years of ultra-low interest rates set by the European Central Bank”.

In a related context, a survey last month showed that German business confidence declined more than expected in December, affected by a negative assessment of the coming months amid geopolitical uncertainty and industrial recession in Europe’s largest economy.

The Ifo institute said its business climate index fell to 84.7 points in December from 85.6 in November.

The survey of about 9,000 business managers found an improvement in the assessment of current conditions, but the expectations index fell surprisingly to 84.4 points in December from 87 in November.

Donald Trump’s victory in the US presidential election, coupled with political deadlock in Germany ahead of a snap election in February, has added to the uncertainty at a time when the economy is facing strong headwinds.