German insolvencies keep rising amid weak economy

Berlin, Feb 17 (IANS) The number of insolvencies in Germany rose 26.2 per cent year-on-year in January amid a weak economy, preliminary figures published by the Federal Statistical Office (Destatis) show on Friday.

Double-digit year-on-year growth rates have thus been observed consistently since June 2023. In the first 11 months of last year, the number of corporate insolvencies rose by 23.2 per cent, Destatis was quoted as saying by Xinhua news agency.

"We see a significant increase in corporate insolvencies, but still on the basis of a historically low starting point," Christoph Niering, insolvency administrator and chairman of the Registered Association of Insolvency Administrators (VID), said on Friday.

High-interest rates were "particularly affecting the construction and real estate industry," Niering added. This sector could only react slowly to changes.

"The past year was already difficult -- in 2024 there will probably be even more corporate insolvencies," credit agency Creditreform warned at the beginning of the year. Healthcare, textile trade and gastronomy are particularly affected due to price increases and weak consumer sentiment.

To relieve the catering sector during the pandemic and the energy crisis, the German government temporarily reduced the tax rate for food in restaurants from 19 per cent to 7 per cent. Since the beginning of this year, however, the regular tax rate has applied again.

Federal Minister for Economic Affairs and Climate Action Robert Habeck said on Wednesday that the government would significantly lower its economic forecast for this year, expecting only 0.2 per cent growth. This is "dramatically bad," Habeck said. "We can't go on like this."