BERLIN, Aug 10 – Germany’s ruling coalition is at odds over extending a freeze on insolvency rules put in place to avoid a wave of corporate bankruptcies due to the coronavirus crisis.
In March the government gave companies that find themselves in financial trouble due to the pandemic a respite by allowing them to delay filing for bankruptcy until the end of September.
Over the weekend, Justice Minister Christine Lambrecht, of the co-governing Social Democrats (SPD), set out a proposal to extend the freeze until the end of March 2021, but the plan drew criticism from senior lawmakers from Chancellor Angela Merkel’s conservatives on Monday.
“We have to be careful that we don’t drag along any zombie companies that already had no future even before the coronavirus crisis,” Joachim Pfeiffer, chief lawmaker for economic policy in Merkel’s parliamentary group, told Reuters.
Hans Michelbach from the Bavarian CSU sister party warned that a long extension of the freeze would actually not reduce, but increase economic problems and should finish by the end of the year at the latest.
The freeze on bankruptcy filings has contributed to a drop in the number of corporate insolvencies despite the coronavirus crisis plunging Europe’s biggest economy into its deepest recession during peacetime.
The Federal Statistics Office said on Monday that courts registered 1,504 corporate bankruptcies in May, down nearly 10% year-on-year.
However, courts put the claims of creditors potentially affected by those bankruptcies at 3.1 billion euros ($3.7 billion), up from around 2.5 billion euros in May last year.
“This increase … is due to the fact that more economically important companies filed for bankruptcy in May 2020 than in May 2019,” the office said in a statement. ($1 = 0.8495 euros) (Reporting by Michael Nienaber and Andreas Rinke; Editing by Susan Fenton)