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Fewer corporate failures

June 12, 2012

The number of German firms going bankrupt went down in the first quarter of 2012 despite an unusual surge in insolvencies in March. But analysts say the situation will likely get worse as the euro crisis takes its toll.

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Poster reading "Closed because of insolvencies"
Image: Fotolia/Markus Bormann

Germany posted a year-on-year decrease in corporate failures in the first three months of the current year, the National Statistics Office (Destatis) reported on Tuesday. It said the number of insolvencies dropped by 0.6 percent to total 7,483.

The number of household insolvencies also declined during the same period. It dipped by 2.8 percent to 25,426 as the German economy picked up speed at the beginning of the year and unemployment hit a seasonal low.

But despite a lower number of Q1 insolvencies, the outstanding claims of creditors surged to 10 billion euros ($12.5 billion), up from just seven billion euros in the same quarter last year. The increase in claims was attributed in large part to the bankruptcies of several big solar companies in Germany.

Bleak outlook

Within the first quarter of 2012, March stood out as a harbinger of a worse phase to come. There were 1.7 percent more company insolvencies in the third month of the year, marking the highest monthly leap since March 2010 when a staggering 8.7-percent increase was registered by statisticians.

Market researchers believe insolvency cases may soar again in the months head. "We expect a lot more companies filing for bankruptcy," the head of the German Insolvency Administrators' Association (VID), Christoph Niering told the Reuters news agency.

"There are more and more signs that the German economy is no longer able to decouple itself from the slump in the other eurozone nations," Niering added.

hg/pfd (Reuters, AFP, dpa)