Coronavirus crisis threatens survival of 15% of German companies

Jill Petzinger
·Germany Correspondent, Yahoo Finance UK
·3-min read
Locked tables and chairs of a restaurant stand in front of Brandenburg gate during the country's month-long COVID-19 lockdown, in Berlin, Germany, November 2, 2020. REUTERS/Hannibal Hanschke
Locked tables and chairs of a restaurant stand in front of Brandenburg gate during the country's month-long COVID-19 lockdown, in Berlin, Germany, November 2, 2020. Photo: Hannibal Hanschke/Reuters

The COVID-19 pandemic has cast thousands of companies large and small into a fight for their lives. In Germany, with the second partial lockdown shuttering the tourism, gastronomy, and leisure sectors, many fear they won’t survive.

According to a survey released today (1 December) by the Munich-based Ifo economic institute, an average of 15% of firms say their very existence hangs in the balance because of the ongoing pandemic.

However, that percentage is an improvement from the June survey, when the Ifo found 21% of companies believed they would not survive the crisis.

READ MORE: German election 2021: The men who would be Merkel

"Nonetheless, 86% of travel agencies and tour operators currently feel threatened, 76% of hotels and 62% of restaurants," said Klaus Wohlrabe, head of the Ifo surveys.

Germany’s central bank warned in October that lenders need to brace for a wave of post-pandemic insolvencies.

In its 2020 financial stability report, the Bundesbank said that the government’s fiscal measures to help companies survive this year, which include a temporary suspension of bankruptcy-declaration rules, have lead to fewer insolvency filings in 2020 compared to 2019. However, that could change early next year the bank said.

The German government and leaders of the 16 states agreed last week to extend the partial lockdown until 20 December, and potentially into January, with a brief relaxation of rules to allow for families to meet in larger groups over the holiday weeks.

READ MORE: COVID-19: Surge in furloughs among German firms as lockdown extends

German unemployment fell to 2.69 million in November, with the seasonally-adjusted unemployment rate coming in at 6.1%, from 6.2% in October — the best November data sine 2009. However, it should be noted that the number of companies that have furloughed their staff surged to 28% last month, and 90% of hotel businesses.

Germany managed to keep its first wave of coronavirus relatively well contained. However, the second wave which has been gathering pace since September, is proving much harder to flatten.

The country has now recorded over 1 million cases this year, and close to 17,000 deaths. Hospitals across Germany are now saying that they are in danger of reaching full capacity in their intensive care units.

READ MORE: Grim mood grips German managers during November's partial lockdown

The finance ministry said it would extend its compensation to companies for lost November revenue by another month. It had earmarked €10bn (£8.9bn, $11.9bn) for November to compensate businesses for up to 75% of lost revenue in the month — based on their revenue in the same month last year.

However, Merkel’s chief of staff Helge Braun told Handelsblatt that this “ad hoc” support measure was not sustainable “in the long run.”

Watch: Why can’t governments just print more money?