According to Allianz Trade, a surge in company bankruptcies is projected for the third consecutive year in 2024. “The pandemic has subsided, support measures for COVID-19 have ended, but there is war in Europe and the Middle East, all of which have consequences for the economy,” states the German insurance company, headquartered in Hamburg. “The Allianz Trade insolvency study indicates that ongoing economic weakness, structural challenges, and tighter financing conditions are likely to lead to more companies facing financial difficulties in 2024.”

Globally, Allianz Trade economists expect a 9% increase in bankruptcies due to lower growth, supply chain disruptions, and geopolitical uncertainties. The most significant rise in bankruptcies is anticipated in the USA (+28%), as well as in Spain, and 31% in the Netherlands.

The outlook is bleak for Europe, as the number of EU companies declaring bankruptcy at the end of 2023 exceeded pre-pandemic levels recorded between 2016 and 2019, according to Eurostat. The EU's Statistical Office reported that overall business bankruptcies across the EU rose by 0.6% at the end of last year. Bankruptcies increased most in the transportation and storage sector (+9.3%), followed by trade (+7.7%) and accommodation and food service activities (+1.1%).

According to Eurostat, among EU countries, Croatia (+18.5%), Slovakia (+16.8%), and Luxembourg (+15.7%) recorded the highest quarterly increase in the number of companies declared bankrupt between October and December, while the largest decreases were in Latvia (-26.8%), Hungary (-25.6%), and Romania (-23.4%).

Germany is expected to see the highest number of bankruptcies this year, according to Allianz Trade. Bankruptcies among German companies are expected to rise by 13% in 2024 compared to the previous year. “This increase has already begun, especially in the second half of 2023,” says Milo Bogaeerts, head of Allianz Trade. “Here, the number of bankruptcies has noticeably accelerated, recording a 25% increase compared to the second half of the previous year.”

Allianz Trade analysts expect the number of company bankruptcies in Germany to increase by about 20,260 in 2024. For 2025, this number is expected to fall just below 20,000, due to the anticipated recovery of the German economy.

For now, however, the European Commission has already had to revise its economic forecasts for this year downwards. “In a normal society, the first reaction would be to try to increase GDP using fiscal policy in a countercyclical manner, as is the case in the United States,” sources say. “Conversely, in Europe, the concern is to respect the agreed parameters of public finances and reduce deficits through austerity. Something that then further reduces demand and GDP.”

The latest statements by the German Minister of Finance, Christian Lindner, on a three-year freeze on social spending to provide funds for defense and Ukraine, “clearly demonstrate the inability of some to understand that we are at a moment where fiscal policy must become expansionary,” the same sources note.