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German insolvencies set record

Published on 03/02/2004

3 February 2004

DUESSELDORF – Nearly 40,000 German businesses, a record, filed for insolvency last year, a credit-checking agency said Tuesday, adding it saw no sign that the trend had turned downwards yet.

Creditreform, which compiles credit-worthiness data from company registries, said the national tally was 5.5 percent above that of 2002. The total was projected from January-October figures published by the Federal Statistics Office.

The figures indicate the economic slowdown, which Germany is slowly emerging from. December retail sales in the nation declined 2.2 percent compared to a year earlier, as Christmas season buying failed to boost demand.

Vacant shops and offices have become a common sight in German cities in recent weeks as leases expire and weak businesses close.

Creditreform, based in Duesseldorf, forecast the number of insolvencies would, at best, continue for some time at the current high level. But it said it was more likely the annual rate would creep up another 5 percent to 42,000.

Creditreform chief executive Helmut Roedl said the principal challenge for troubled firms was a shortage of financing and customers failing to pay their bills. Banks wanted to eliminate bad risks from their books.

He said this often proved fatal for family owned businesses that operated on low levels of equity and relied on loan finance.

Mario Ohoven, president of the Federation of Mid-sized Companies BVMW, attacked the government after the Creditreform announcement.

“Despite the government’s tax reforms, continuing high levies and costs are visibly grinding the companies apart,” he said, adding that it was “frightening” that the average equity ratio had sunk to 17 percent of capital in the category of mid-sized family owned firms.

Subject: German news