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German Parliament Presses Merkel To Extend Insolvency Waiver

German Parliament Presses Merkel To Extend Insolvency Waiver

Germany's upper house of parliament called on Monday for Chancellor Angela Merkel's government to extend a waiver on insolvency filings for firms hit by the coronavirus crisis.

BERLIN: Germany’s upper house of parliament called on Monday for Chancellor Angela Merkel’s government to extend a waiver on insolvency filings for firms hit by the coronavirus crisis.

The provision, which is due to expire at the end of the month, has helped reduce the number of bankruptcies in Europe’s largest economy through lockdown, with the Federal Statistics Office last week reporting a 31.9% year-on-year drop in October.

The Bundesrat upper house called unanimously in a resolution for an extension to the waiver, saying that without it healthy but indebted companies would be forced to file for insolvency “through no fault of their own”.

Justice Minister Christine Lambrecht and the parliamentary group of the Social Democrats (SPD), junior partners in the ruling coalition, are also pushing for an extension. They have met resistance from Merkel’s conservatives.

Critics say Berlin risks impeding what economic liberals call “creative destruction”, the term popularised in the 1940s by Austrian economist Joseph Schumpeter to describe unviable firms folding to make way for more dynamic newcomers.

The issue is knowing how to distinguish the zombies, generally defined as companies which would anyway struggle to cover their interest payments, from essentially healthy firms that have run into temporary trouble.

Germany’s central bank, the Bundesbank, said on Monday the economy is managing to stay afloat but could suffer a “sizeable setback” if coronavirus curbs are extended again.

Merkel wants “very fast action” to counter the spread of COVID-19 mutations and has brought forward a meeting with regional leaders to Tuesday to discuss tougher restrictions.

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first published:January 18, 2021, 21:45 IST