Global insolvencies projected to rise in 2009

The financial and economic crisis is leaving companies in distress all over the world, with insolvencies rising almost simultaneously everywhere.

Accoring to German credit insurer Euler Hermes Kreditversicherungs-AG, part of the Alianz financial group, the number of corporate insolvencies is rising dramatically worldwide as a consequence of the crisis in the international financial markets and the fundamental changes in the economic environment.

The current insolvency projections by the experts at credit indicate that their calculated ''Global Insolvency Index'' will rise 25.1 per cent this year and another 25.4 per cent in 2009.

''The recession has the economy in its grip all over the world,'' says Gerd-Uwe Baden, CEO of the Hamburg-based Euler Hermes. The bad debt risk is thus also rising substantially for German companies.

In the US, the trend already turned around drastically last year, with a 44-per cent leap in corporate insolvencies. Euler Hermes's experts project yet another massive increase of nearly 45 per cent for 2008, and as much as 50 per cent next year, for an ultimate total of nearly 62,000 companies going under. Thus far the situation has had a particularly severe impact on industries directly related to the real estate market or real estate financing.

The downturn in Japan will be less severe, with increases of 12.0 per cent this year and 7.9 per cent next year.

A significant rise in Europe
A rapid worsening of the insolvency trend is also obvious in Europe.Western Europe will see a total of about 169,000 insolvencies this year (a 13.5 per cent increase). The expected figure for next year is a bit more than 197,000 (up 16.7 per cent).

The situation is changing in different ways in Europe. 

• Traditionally, the highest rates of corporate insolvencies have been in France, where the figure is expected to rise 12 per cent both this year and next, to a total of about 62,700.
• The increase in the UK will be substantially sharper, with 24.7 per cent more bankruptcies this year and 34.2 per cent more next year, for a total of 38,200.
• The expected increases in Italy are expected to be 10.0 per cent in 2008 and 12.1 per cent in 2009.
• For the Netherlands, the Euler Hermes expects only a 10 per cent increase this year, but a surge to 38.3 per cent in 2009.
• Some Eastern European countries are also facing critical changes
• Bankruptcies will rise 20 per cent next year in Hungary, to about 14,000, and 15 per cent in the Czech Republic, to more than 1,500.