Bankruptcies in Germany surge as economic outlook turns bleak

FRANKFURT, May 26 (Xinhua) -- The second largest German shoe retailer has confirmed that most of its stores in Germany will be closed after its efforts to woo investors failed to produce the expected results.

This means closing up to 150 of the 180 stores under the brand Reno, the insolvency administrator, Immo Hamer, said Thursday.

The shoe retailer changed hands in September 2022, but the attempts by the new owner to rescue the struggling business failed and a bankruptcy procedure was initiated in March.

This development is the latest in a series of closures announced in recent weeks, including last week's news that Goertz, a Hamburg-based shoe retailer, was closing its stores in Germany.

Describing the magnitude of the problem, Rolf Pangels, general manager of the Textile Shoes Leather Goods (BTE) trade association, was quoted by the German media as saying that around 1,500 shops, 13 percent of all the shoe stores in Germany, closed last year.

The shoe retail industry in Germany was first hit by the COVID-19 pandemic, which led to lockdowns and kept people indoors.

The stubbornly high energy and raw material costs, which are largely blamed for the high inflation in Germany, just add to the shoe industry's troubles.

But the wave of bankruptcies is not limited to the footwear sector. There are signs that bankruptcies are on the rise across the country.

In Bavaria, one of the richest states in Germany, 577 companies became insolvent in the first quarter this year, the local statistical office announced on Thursday.

While this figure is lower than the historical average, the pace of increase still worries some researchers at Allianz Trade, a trade credit insurance company.

In a recent report, the company warned that the number of bankruptcies in Germany had been rising at a pace unprecedented since the financial crisis in 2008. During the last quarter, the number of companies filing for bankruptcy increased by 19 percent, according to data released by the German Federal Statistical Office (Destatis).

According to Allianz Trade, the tide of bankruptcy in Germany will extend well into 2024. "Our forecasts for bankruptcies in Germany for 2023 and 2024 are above the pre-COVID levels."

These forecasts are rooted in Allianz Trade's gloomy outlook for Germany's economy, expecting that 2023 will be "a lost year economically" for Germany, "and then the situation will be far from rosy in 2024."

A survey conducted by the German Chamber of Commerce and Industry among around 21,000 companies found that in general, energy and raw material costs are weighing on the business sentiment of German companies.

Commenting on the survey, Ilja Nothnagel, a member of the DIHK's executive board responsible for economic analyses, said the economic outlook remains bleak for the next twelve months due to weak demand.

"There are still no signs of a broad-based upturn," Nothnagel said.