Corona policy: Companies have to get by again without help

When Germany went into an extensive lockdown two years ago, the insolvency administrators were looking forward to supposedly golden times.

Many larger and smaller companies would not survive the complete shutdown of their business activities for long, according to the assumption at the time.

Some observers speculated that the restructuring needs of companies that had gotten into financial difficulties could even assume proportions reminiscent of the phase after reunification.

The big market shakeout has actually come, but for the insolvency administrators.

According to current data from the industry service Indat, their number has fallen by a good third to around 2,100 in the past two years.

No wonder, after all, the total number of procedures fell drastically during the pandemic, even if high-profile individual cases such as the recent MV shipyards may give a different impression.

From 2019 to 2021, the number of insolvencies of partnerships and corporations fell by more than a quarter to just 5,800.

speed before accuracy

The reason for the underemployment of the insolvency professionals is obvious: huge state financial injections have prevented the collapse of parts of the economy.

According to the Ministry of Economic Affairs, almost 80 billion euros were paid in direct aid for companies alone.

In addition, there are loans of around 55 billion euros and, so far, almost 40 billion euros for short-time work benefits, which companies can use to reduce their personnel costs without laying off employees.

An unprecedented level of state intervention in the market.

After the outbreak of the pandemic, political decision-makers were concerned that the forced shutdown of all business activities could not only throw many manufacturing companies and service providers into existential difficulties, but that banks could also be sucked into a downward spiral by increasing loan defaults.

A similarly threatening scenario as after the financial crisis should be prevented at all costs by rapid state aid.

This plan worked after a few teething problems.

In the beginning, association lobbyists and managing directors complained staccatoly about delayed or missing payments, but now there are hardly any complaints.

The subsidy machine is running, and large parts of the German economy have long since come to terms.

Because speed is more important than accuracy in exceptional situations, many tests have been shortened or cancelled.

Free riders were accepted as well as the resulting debates, such as whether car companies could make big profits and at the same time benefit from short-time work benefits.

Financial injection is extended

However, it is now just as important as taking decisive action at the beginning of the pandemic to tackle the exit and to keep the habituation effect to a minimum.

Unfortunately, the government is sending the opposite signal.

She wants to extend the bridging aid that expires at the end of March until the end of June, with reference to the neediness of individual sectors.

The traffic light coalition is committed to a “gradual return to normality” and links the reimbursement of operating costs and other expenses to the sales declines suffered.

Nevertheless, the extension sends the wrong signal at a time when the pandemic is increasingly losing its terror and it should only be a matter of time before the serious encroachments on fundamental rights are generally lifted.

On the other hand, a resolute return to market mechanisms, which were undermined by the Corona policy, would be of enormous importance.

This also includes the selection of business models that no longer work.

It doesn't have to be the often-cited "zombie companies" that only drag themselves around on state money.

In a market environment that is changing rapidly in many places despite Corona, permanent state aid also prevents or delays necessary adjustment processes and innovations.

However, they are essential for a vital market economy in international competition.

The longer the dependency on aid payments lasts, the harder the subsequent withdrawal will be.

Insolvency administrators may soon have more work to do.

At least on those who survived.