(Bloomberg) — Germany extended another crisis tool to prevent corporate bankruptcies, a move that critics say will store up bigger problems later for Europe’s largest economy.
The longer suspension on insolvency filings has raised alarm bells that it’s masking a growing credit risk that could explode into a wave of bankruptcies when the moratorium ends. It may also be creating a cohort of zombie companies that hold back investment and innovation and act as a drain on the economy.
“It was an appropriate measure during the acute phase of the coronavirus crisis,” said Ulrich Keil, founder of insolvency register Insolvex. “But the risk is big that an extension will create zombie firms.”
The insolvency waiver will now stay in place until the of the year, while Germany’s enhanced Kurzarbeit job scheme will run through 2021.
Across Europe, such support has saved companies and jobs — Germany’s Ifo institute predicts an