Germany is facing a wave of corporate bankruptcies, with 4,215 companies filing for insolvency in Q4 2024, the highest number since the 2009 financial crisis. The surge has put nearly 38,000 jobs at risk, according to data from the Halle Institute for Economic Research (IWH).
Why Are Insolvencies Rising?
- High Interest Rates – After years of cheap debt, rising borrowing costs are squeezing businesses.
- Inflation & Cost Pressures – Soaring energy and labor costs are cutting into margins, making it harder for companies to stay afloat.
- End of Government Support – Pandemic-era subsidies delayed insolvencies, but their removal is now exposing struggling firms.
Sectors Hit Hardest
- Services – Insolvencies up 47% year-over-year.
- Manufacturing – Bankruptcies rose 32%, reflecting weak demand and supply chain issues.
Steffen Müller, IWH’s head of insolvency research, pointed out that artificially low bankruptcy rates during the pandemic masked the financial instability of many businesses. “Years of low interest rates prevented insolvencies. Pandemic subsidies delayed them further,” he said.
Broader Economic Impact
Germany’s economic growth has stalled, with GDP rising just 0.1% over five years. The Bundesbank warns that continued insolvencies and high borrowing costs could drag the economy down further.
What’s Next?
- More business failures likely as borrowing remains expensive.
- Pressure on policymakers to ease financial conditions or risk deeper economic trouble.
- A slow recovery unless demand picks up and inflation stabilizes.
Bottom Line
Germany’s corporate sector is under strain, with businesses struggling to cope with rising costs and fading government support. Insolvencies will remain high in 2025, testing the resilience of Europe’s largest economy.
