1/17/2025–|Last updated: 1/17/202512:20 AM (Mecca time)
Under the weight of a prolonged economic recession and political tensions, Germany is facing an unprecedented wave of bankruptcy that threatens the foundations of its ancient economy, according to observers.
The end of 2024 witnessed an increase in the number of bankrupt companies in Germany, reaching levels not recorded in 15 years.
According to press reports, 4,215 companies declared bankruptcy in the last quarter of 2024 alone, causing the loss of about 38,000 jobs, before which the government seemed unable to confront the crisis.
Data from the Federal Statistical Office show that bankruptcies jumped by a significant 22.9% last November compared to the same month in 2023.
Also according to the Federal Statistical Office, 10,702 companies filed for bankruptcy in the first half of 2024, an increase of 24.9% over the first half of the previous year.
In the face of these challenges, the official scene seemed helpless, as German Economy Ministry spokesman Stefan Haufe said, “The German economy is currently facing major challenges, with a mixture of positive indicators and others that require additional efforts.”
He added in a statement to Al Jazeera Net: “We need to improve competition conditions, control high energy prices, accelerate legislative reforms such as the talent migration law, and improve the conditions for establishing companies with the aim of empowering them, as in the Capital Development Initiative.”
This month, Steffen Müller, head of bankruptcy research at the Halle Institute for Economic Research, reported that corporate bankruptcies in Germany had risen to levels similar to the 2008 financial crisis.
“We are in the range where some months could easily reach 20-year highs,” he said. “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,” Mueller added.
Burdens on the economy
In contrast to the aspirations and hopes in official statements, the reality appears different, and Dr. Najat Abdel Haq, an expert in European economic affairs, explains the roots of this crisis by saying: “Since the Ukraine war, Germany has witnessed an unprecedented rise in energy prices, in addition to its delay in the processes of digitization and technological development. These are unexpected things from the largest European economy.”
The expert adds to Al Jazeera Net that moving some industries outside Germany due to high costs was one of the main reasons that led to the escalation of this wave of bankruptcies, and the increasing competition with China, especially in the electric car sector, has left a major impact on one of the pillars of the German industry.
Reports from the Leibniz Institute for Economic Research indicated that the wave of bankruptcies included almost all sectors, with the exception of real estate, housing, and hospitality, which reflects the effects of increasing costs and pressure facing companies.
Steven Mueller believes that “low interest rates and government subsidies during the Corona pandemic were temporarily preventing bankruptcy, but with the cancellation of this aid and the rise in interest rates, the impact of the crisis began to appear strongly starting in 2022.”
Laayoune awaits 2025
The new year does not seem brighter, as with the continuation of the crises of previous years, the Credit Reform Foundation expects a noticeable increase in bankruptcies starting in February 2025.
As for the Federation of German Industries, it issued a stark warning in its latest plan, indicating that Germany is losing its attractiveness as an investment destination. The federation said in a statement – a copy of which was obtained by Al Jazeera Net – that “the current reforms are no longer sufficient. We must focus on strengthening the forces of economic growth instead of adapting to the recession.”
Bureaucracy is the hidden enemy of growth
Hardly anyone in Germany denies the enormous bureaucracy in various sectors, and the fact that it constitutes an additional burden on the German economy. The Ifo Institute for Economics indicated in its latest report that the costs resulting from bureaucracy amount to 146 billion euros (about 150 billion dollars) annually.
The institute’s president, Oliver Falk, said, “Inaction on reform is very costly compared to the potential return that may be achieved from reducing bureaucracy.” He added, “If Germany can catch up with Denmark in the digitization of public administration, we will see an increase in economic output of up to 96 billion euros annually.”
The government is at stake
With the continuing energy crisis, faltering structural reforms, and political instability resulting from waiting for the formation of a new government after the next elections next February, the scene appears bleak.
Dr. Najat Abdel Haq commented by saying, “Germany urgently needs to reduce energy prices, accelerate digitization, and reduce bureaucracy to ensure its survival in the global economic race.”
Germany – the economic locomotive of Europe – faces a real challenge to restore its driving force, and the new government will find itself facing a task that is not easy, to find practical solutions that will lead the third largest global economy again according to indicators of improvement and growth, but this will depend on success in forming a strong government or a cohesive coalition that guarantees Moving towards a clear future, according to observers.
