Brief: Germany Prepares for a Wave of Insolvencies

The German central bank is expecting a "sharp rise" in corporate insolvencies.

Editor’s Note: The following is a new content type we are calling Briefs. They are real-time updates on the world’s most pressing geopolitical events, broken down into a reader-friendly format. Please let us know if you have any questions or concerns. Background: The major question surrounding the pandemic-induced global economic crisis is whether major economies will suffer a deep recession or a depression. The fate of Germany, Europe’s largest economy, will play a critical role in determining the broader impact on the Continent and the world. What’s Happened: The central bank of Germany, the Bundesbank, warned in its latest financial stability review that there is a risk of a sharp rise in corporate-sector insolvencies. Insolvencies have been muted thus far in 2020 thanks to government interventions, but much of that assistance is scheduled to expire at the end of the year. According to the Bundesbank, an estimated 6,000 insolvencies are expected in the first quarter of 2021. This number is below the approximately 8,000 insolvencies filed quarterly during the 2008-09 financial crisis, but would put the country on track to significantly surpass the roughly 19,000 insolvencies per year seen in 2018 and 2019. Additional legislation to relax insolvency rules is in the […]

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