Bankruptcy boom
February 4, 2010
The business information and credit collection association Creditreform said that some 210,000 firms are expected to become insolvent in Western Europe during the current year.
The German-based association announced in Dusseldorf on Wednesday that 2009 saw a 22 percent increase in the number of bankruptcies in the region, with about 185,000 firms making a beeline for the bankruptcy judge.
Insolvencies almost doubled last year in Spain and Ireland, Creditreform said. Germany got off relatively lightly with some 34,300 businesses becoming insolvent - but even that was a 16 percent rise over the previous year.
Creditreform board member Helmut Roedl warned that the number of German firms filing for bankruptcy could shoot up to 40,000 this year, exceeding the 2003 peak when approximately 39,500 failed businesses were registered.
"There is currently no silver lining on the horizon," Roedl said, adding that the funding situation was precarious and that raising capital remained a difficult proposition for many small-to-medium sized enterprises.
Scars yet to heal
The economic crisis had left deep scars in the balance sheets of many companies, Roedl said. Moreover, a fall in earnings meant that companies have not managed to build capital reserves. The ever-rising number of bad debts was further worsening the situation.
Should the gloomy forecast for Germany prove correct, it would mark a reversal in fortunes, as German companies have so far coped with the economic downturn much better than their European counterparts.
Creditreform said economic growth forecasts indicated any German upswing would be too small to prevent a spike in insolvencies.
Optimistic growth forecast
The German government said in a recent report that Europe's largest economy would expand more than expected in 2010 at 1.4 percent of gross domestic product (GDP).
Berlin had previously forecast a 1.2 percent expansion, with exports driving growth.
However, the report by the Economics and Technology Ministry said that recovery from the country's deepest recession since World War Two was still fragile. It also warned that the jobless rate was likely to rise from 8.2 percent last year to 8.9 percent in 2010.
rb/dpa/apn
Editor: Sam Edmonds