Economists fear rising number of "zombie companies" in Germany: survey

BERLIN, Oct. 19 (Xinhua) -- A large majority of economists -- 86 percent -- surveyed by the ifo Institute believed that the number of "zombie companies" in Germany, businesses that are economically unviable, increased at least moderately since March when the COVID-19 crisis hit the country, the ifo Institute announced on Monday.

Many economists viewed the suspension of the obligation to file for insolvency, which was extended until the end of the year by the German government, as a cause for the emergence of such zombie companies.

Despite the COVID-19 crisis, local courts in Germany recorded a year-on-year decline in business insolvencies of 6.2 percent, according to figures from the Federal Statistical Office (Destatis).

According to the ifo survey conducted with 120 economists, 96 percent of them believed that the number of business insolvencies would increase as soon as companies would be required to file for insolvency again when the economic policy measures come to an end.

In order to mitigate the economic effects of the COVID-19 crisis, the German government also introduced quick loans for struggling companies via the state-owned development bank KfW as well as additional measures to avoid lay-offs such as modified short-time work regulations.

Half of the economists surveyed believed that the rising number of zombie companies was also linked to the recent extension of short-time work benefits in Germany until the end of 2021. Thirty-two percent feared the KfW state loans could lead to the emerging of zombie companies.

By last week, KfW had recorded around 92,000 loan applications for COVID-19 aid worth around 55 billion euros (64.7 billion U.S. dollars). Around 97 percent of applications were submitted by small and medium-sized enterprises in Germany.

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