Germany is facing a troubling economic trend as insolvency declarations have seen a substantial increase, according to preliminary data from the Federal Statistical Office (Destatis).

In December 2024, insolvency filings rose by 13.8% compared to the same month the previous year.

Over the course of the year, the number of bankruptcy filings increased by 16.8% compared to 2023.

In October alone, local bankruptcy courts reported 2,102 corporate insolvency filings, a 35.9% increase from October 2023.

Based on these filings, creditors' outstanding claims are estimated to be €3.8 billion, a significant rise from €1.6 billion a year earlier.

Several factors have been attributed to this surge in insolvencies, including high energy costs, extensive bureaucracy, political uncertainty, and consumer reluctance to spend.

Additionally, the expiration of exceptional rules implemented to prevent a wave of bankruptcies during the COVID-19 pandemic has added to the current situation.

It is important to consider that these figures might be slightly distorted as insolvency applications only appear in statistics after the first decision by the bankruptcy court.

Often, the actual filing date can be nearly three months earlier.

Volker Treier, Chief Analyst at the German Chamber of Industry and Commerce (DIHK), called the October figures an "unambiguous warning signal," noting that corporate bankruptcies reached their highest level in a decade.

According to the Creditreform credit agency, the number of companies declaring insolvency in Germany in the previous year was estimated at 22,400, the highest since 2015.

Moreover, insolvency filings could reach the 32,000 cases observed during the 2009 financial crisis peak by 2025.

Christoph Niering, President of the German Association of Insolvency Practitioners (VID), remarked that the increase in insolvency figures indicates ongoing structural changes within the German economy.

"We are witnessing simultaneous upheavals across multiple sectors and key industries," he noted.

The transition to new energy sources and market adjustments are proving particularly challenging in areas where investment in sustainability has lagged for decades.

"The deficits that have developed in companies cannot be compensated in the short term," Niering explained.

Hungary has also monitored these developments with concern.

Hungarian government officials have frequently pointed to Germany as a source of economic obstacles, arguing that the Hungarian economy's desired growth is hampered by the German economic crisis.

The Ministry of National Economy recently stated that Hungary's industry is constrained by Germany's "crisis-ridden state," primarily through the auto industry.

They contend that the economic performance is being dragged down by external factors, with Germany's political and economic turbulence exerting negative influences, notably in the automotive sector.

As global economies continue to face their own unique challenges, the ripple effects of Germany's economic situation remain a crucial factor for its partners, including Hungary.

The path forward will require careful navigation through complex economic dynamics that continue to evolve.