Bankruptcy wave fails to materialize: Declining bankruptcy figures despite Corona – is that the calm before the storm? | message
In view of the strong price recovery in the DAX, MDAX and SDAX, many investors are rightly wondering whether the German economy has weathered the big corona crash? However, despite an impressive recovery rally for many German stocks, there is now no reason to give the all-clear.
Federal Statistical Office is a surprise
Despite the rampant corona pandemic and the drastic protective measures, the district courts reported 4,683 corporate failures in Germany between January and March, according to the Federal Statistical Office. As a result, the number of bankruptcies in the first quarter of 2020 fell by around 3.7 percent compared to the first quarter of 2019.
These cases mainly consist of 788 bankruptcies in the retail and automotive sector, 761 bankruptcies in the construction industry and 514 bankruptcies in the hospitality industry. Despite a declining number of insolvencies, the total claims of creditors, at 7.3 billion euros, were far above the sum of 4.7 billion euros from the previous year.
In addition, 20,672 other debtors reported insolvency in the first quarter of 2020. Which means a decrease of 6.5 percent compared to the same period last year. The number of 20,672 cases consists of 15,095 private bankruptcies and 4,659 bankruptcy applications from previously self-employed persons.
The bankruptcy wave is missing for now
However, the number of regular insolvency proceedings fell not only between the first three months of the year, but also in April. The number of registered bankruptcies in the fourth month of the year fell by 13.4 percent compared to the same month last year. “The economic crisis caused by the corona pandemic and the measures to contain it are not reflected in an increase in the number of insolvency proceedings opened in March and April,” said a statement from the Federal Statistical Office.
Three reasons for the paradoxical development
The fact that the declining number of insolvencies is currently not a reliable basis for assessing the situation within the German economy depends on three factors. Due to the pandemic, the processing times at the relevant courts are currently very long, which means that decisions on the individual proceedings are delayed considerably.
Furthermore, the Federal Government has decided to suspend the insolvency application until September 30, 2020. While companies normally have to announce their insolvency or over-indebtedness within three weeks in order to avoid civil and criminal liability, entrepreneurs can now, provided the insolvency reason is related to the corona pandemic, wait for their application and in the meantime themselves carry out a renovation. “The lack of application options has a significant impact on the statistics,” Christoph Niering, the chairman of the Association of Insolvency Administrators, told Reuters.
In addition, the figures from the German Federal Office only relate to preliminary insolvency proceedings, but not to so-called protective shield and self-administration proceedings, which are currently mainly used by larger corporations.
No all-clear from the economy
The aforementioned factors massively gloss over the current bankruptcy figures in Germany. The lack of bankruptcy currently suggests economic strength, but in reality a different wind is blowing. Many experts assume that the number of bankruptcies will only increase after the end of the corona measures.
“Customers will not pick up on the time before the crisis as quickly, because the health risks continue to exist – and there are more than ten million short-time workers who have to cope with a significant drop in wages,” said Niering of a possible recovery in Germany Economy.
According to this assessment, Niering expects a significant increase in regular insolvency proceedings for the current year. “As the number of bankruptcies has decreased continuously in recent years, even an increase of 20 percent to 23,000 would be little compared to the financial crisis,” said the chairman of the Association of Bankruptcy Administrators. Accordingly, it is quite possible that the Corona bankruptcy wave will roll over the German economy with a certain delay due to the numerous measures.
Pierre Bonnet / editors Forex-news.com.net
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