German department store chain Galeria Karstadt Kaufhof is seeking protection from creditors to stay afloat, it said on Wednesday, after nationwide store closures to help to contain the spread of the coronavirus, Reuters reported. Galeria said that all its outlets have been closed since March 18, leading to about 80 million euros ($87.5 million) of lost weekly revenue while the company continues to incur the bulk of the costs.
German officials expect unemployment in Europe’s largest economy to rise sharply as a consequence of the coronavirus crisis, even though hundreds of thousands of companies have applied for their staff to join a government-subsidised short-term work programme designed to avoid lay-offs, the Financial Times reported.
The coronavirus outbreak will push Germany into recession in the first half of this year and could result in output in Europe’s largest economy contracting by up to 5.4% this year, Germany’s council of economic advisers said on Monday, Reuters reported. Germany is in virtual lockdown, with more than 57,000 people infected and 455 deaths from the virus. Schools, shops, restaurants and sports facilities have closed and many firms have stopped production to help slow the spread of the disease.
Covid – 19 hits the economy hard. Shops are closed, production is suspended in many companies. The concerns of entrepreneurs are great, many are afraid of bankruptcy in the corona crisis, the Bandera County Courier reported. The federal government wants to prevent the worst with loans and grants. But even if Federal Minister of Economics Peter Altmaier (CDU) promised quick help on Wednesday, it may take time for the money to reach the companies. Many companies would have to file for bankruptcy because they are no longer solvent – even though rescue is approaching.
The German government is to spend an additional €122.5bn this year to counter the slump caused by the coronavirus as it rips up the fiscal rule-book that has guided Europe’s largest economy for a decade, the Financial Times reported. Angela Merkel’s cabinet is set to pass a €156bn supplementary budget on Monday, which also foresees a dramatic €33.5bn plunge in tax revenues for this year. It will raise a total of €150bn in extra debt.
German restaurant chain Vapiano SE on Friday said it was insolvent and would apply for government assistance to avoid formally filing for insolvency, blaming the coronavirus crisis for a drop in sales, Reuters reported. “Due to the drastic decline in net sales and revenues, an insolvency reason in the form of cash flow insolvency for Vapiano SE has occurred as of today,” the company said. Vapiano’s 55 German restaurants were closed yesterday evening, and almost all of the chain’s more than 230 outlets are now closed, the restaurant chain said in a regulatory statement.
Volkswagen Group, the world’s biggest carmaker, is suspending production at factories across Europe as the coronavirus pandemic hits sales and disrupts supply chains, the company said on Tuesday, The Irish Times reported. The German carmaker, which owns the Audi, Bentley, Bugatti, Ducati, Lamborghini, Porsche, Seat and Skoda brands, also said that uncertainty about the fallout from coronavirus meant it was impossible to give forecasts for its performance this year.
Germany plans to ease bankruptcy rules to give companies hit by the coronavirus more time to secure financial aid, Bloomberg News reported. The Federal Ministry of Justice is preparing legislation to suspend a rule that forces companies to arrange help or file for insolvency within three weeks of getting into difficulties. The waiver, previously introduced to help businesses hurt by severe flood damage, will be restricted to companies affected by the outbreak that are eligible for government aid or are securing other forms of refinancing, the ministry said in a statement Monday.
Europe must provide liquidity to companies hit by the coronavirus outbreak to avoid a banking crisis, a group of German economists said on Friday, Reuters reported. The warning came as Germany’s top bankers headed to Berlin to confer with the finance minister on possible measures. The economists, affiliated with the Leibniz Institute for Financial Research SAFE, said a liquidity crunch in the economy could result in a new banking crisis. “Only coordinated fiscal policy measures have the potential to reduce the default risks of banks and thus stabilize the financial system,” they wrote.
The number of bankruptcies in Germany is set to rise this year for the first time since the financial crisis in 2009, the head of Germany’s insolvency administrators’ association said, warning that government aid could not protect all companies, Reuters reported. Europe’s largest economy is braced for a difficult period as the pandemic spreads around the world, severing supply chains and leading to collapsing demand for the exporting powerhouse’s goods. “There will be a rise in insolvencies for the first time since 2009, and it will be a clear increase,” Christoph Niering told Reuters.