Threatened companies: risk more bankruptcies

Should every company threatened with bankruptcy receive state aid? The German insolvency administrators are calling for a rethink: it is better to save those companies that are actually sustainable.

After furniture manufacturer Hülsta, toilet paper manufacturer Hakle and shoe retailer Görtz, the department store group Galeria Karstadt Kaufhof is the next bankruptcy in a series of traditional names. And again the call for government help is heard. “Don’t do it!” replies the chairman of the Association of German Insolvency and Administrators (VID), Christoph Niering. He calls for a rethinking away from state aid towards more company bankruptcies – according to the motto: “One’s sorrow is another’s joy”.

No more life support?

“State aid should only benefit companies that are viable for the future. Because companies that are no longer viable tie up important resources such as specialized workers who are urgently needed in viable units,” is Niering’s maxim. In other words, it is better to let companies go than to keep them alive artificially. According to Niering, the employees affected by the job loss due to the insolvency found a new job within a very short time, unlike a few years ago. Even the age of the employees hardly plays a role anymore.

Because they are all more in demand than ever: According to Detlef Scheele, until July Chairman of the Board of the Federal Employment Agency, the German labor market needs around 400,000 immigrants a year to close the skills gap in various sectors; the unemployment rate nationwide is currently 5.3 percent. Niering, who has overseen more than 2,000 insolvency and self-administration proceedings in 25 years, asks himself: “Is it right today to keep every company? Or would these jobs not be in much better hands with another company with a really viable, future-oriented business model? “

Discussion about further help for Galeria

Example Galeria Karstadt Kaufhof: For a “huge sales area where fewer and fewer people get lost”, as Niering puts it, the economic stabilization fund has already helped with 680 million euros; more than two billion euros of debt have been canceled to ensure a fresh start. help again? Wrong for Niering: “The group argues that 17,000 jobs would be lost without outside help. 17,000 jobs are negligible – especially if they are not concentrated in one region but, as in this case, spread across the whole of Germany love the market.”

The union, on the other hand, wants to continue fighting for every job in Germany’s last large department store chain. Stefanie Nutzberger, member of the ver.di federal board, speaks of a “highly threatening situation for people and their families”. In this, the workforce seems to have been tried and tested: The group is now looking for rescue in a protective shield procedure for the second time – in less than two years.

Employees have better prospects than before

Workers in state-backed insecurity: another argument for daring more bankruptcies. “Today, these people not only find a job somewhere else, which is often better paid, but they also feel they are in better hands there: They don’t have to fear that their company collective agreement, which is also a restructuring collective agreement, will be terminated by the employer again,” points out Niering. He sees prospects specifically for department store staff in discount or specialist retail: “They find a lot more peace there: they don’t have to worry about any bankruptcy proceedings coming up again, maybe the third in ten years.”

More landing permits for the bankrupt vulture and less help from the federal eagle would also benefit the taxpayer: “Companies that are constantly in the red or black, that is, that are being kept alive, don’t pay taxes on profits because they don’t have any have; Employees who are on short-time work do not pay wage tax. But if they can place the employees in successful companies, more taxes will also be paid,” calculates Niering. The state does not have to provide short-time work benefits either. For orientation: The Federal Employment Agency recently estimated the expected total costs of corona-related short-time work at 46 billion euros.

Unstable situation makes predictions difficult

Reactions to Niering’s plans for bankruptcy are hard to come by: neither the Confederation of German Employers’ Associations nor the German Confederation of Trade Unions, for example, currently do not want to comment on this. Economists and labor market experts are also saying behind the scenes that the economic situation is currently too unstable for the consequences to be largely assessed.

Holger Schäfer, an expert on employment and unemployment for the Institute of German Economics in Cologne, sees it as necessary for a functioning labor market that workers can switch from shrinking to expanding companies: “Government action must ensure that this function is not impaired too much or there are too many incentives to stay in declining companies.” The problem is assessing the future viability of a company – both for the state and for the employees.

At the annual German insolvency administrator congress in Berlin, which runs up to and including Friday, concrete proposals for “changing the reaction pattern” of politics are to be presented. One goal is likely to be to return to the old European state aid law. According to this, state aid of more than 100,000 euros in the event of a risk of insolvency without the consent of the EU Commission is not legal. Niering sees it this way: “We are currently awarding state aid to every company in crisis. It must swing back.”