Germany's economic woes are deepening as corporate insolvencies surge. According to a study by the Halle Institute for Economic Research (IWH), the insolvency rate among partnerships and corporations in June 2026 was 80% higher than the average June between 2016 and 2019. Sole proprietors and very small businesses were excluded as they are less relevant to the labor market.
The number of corporate bankruptcies in the second quarter of 2026 hit a 20-year high, said Steffen Müller, head of insolvency research at IWH. This was not surprising, as bankruptcies have been rising for several quarters. Germany's economy has been struggling for years, and the expected recovery this year is likely to result in only weak growth.
Major companies have announced significant job cuts. Volkswagen reportedly may cut up to 100,000 jobs worldwide, ZF plans to eliminate 14,000 positions by 2028, and Bosch intends to cut over 20,000 jobs in Germany alone by 2030. According to a study by consulting firm Horvath, another 100,000 industrial jobs could be lost in 2026.
The key question is whether Germany is experiencing a necessary market correction or a deeper structural weakness. Insolvencies can have positive effects: when unproductive companies exit the market, workers and capital become available for more productive sectors. Economist Joseph Schumpeter called this "creative destruction."
However, Müller notes that the slow rise in unemployment is partly due to baby boomers retiring and slowing EU immigration. Workers are not necessarily moving from less to more productive companies. Jutta Rüdlin, a board member of the German Association of Insolvency Administrators and Trustees (VID), emphasizes the importance of looking at new business formations as well.
In the first quarter of 2026, the number of new businesses rose by over 10% compared to the previous year. Müller sees the growth of AI startups as a positive sign. However, insolvencies are affecting almost all industries, pointing to structural weakness. Construction, restaurants, energy-intensive industries, and retail have been hit particularly hard.
Rüdlin stresses that insolvencies usually have no single cause. Healthy companies are resilient to external shocks, but for those with fundamental problems, major events act as catalysts. Delayed effects from COVID-19 measures may also play a role. Müller views the situation as dangerous: "This is more than just a market correction. We are in the middle of a major structural transformation."
Source: www.dw.com