Austria: Bankruptcies fall despite coronavirus pandemic

Austria: Bankruptcies fall despite coronavirus pandemic
Picture of Euro notes ADRIAN DENNIS / AFP
There was a 38 percent decrease in corporate bankruptcies in 2020 throughout Austria, but there are worrying signs on the horizon.

The decrease is believed to be due to laws which mean companies have not had to report insolvencies since 1 March 2020 and financial aid during the corona pandemic.

And while 1,144 bankruptcies were recorded in the first quarter of the year, there were only 538 in the last three months of 2020. 

Wiener Zeitung reports the highest numbers of corporate insolvencies were in the financial services and services sector (667).

This was followed by construction (665), retail (563) and accommodation and catering (484).

There were comparatively few bankruptcies in the areas of information and communication (105), personal services (168) and manufacturing (194), a similar picture to 2019. 

 

Zombie attack

The paper reports the association for the protection of creditors has repeatedly warned of “zombie companies”, or companies which have gone bankrupt, no longer have any assets and can only be kept alive with government funds.

If the aid runs out, a wave of bankruptcies will set in that will extend into 2022, it is said. 

Tourism, gastronomy, the event industry and fitness centers have been faced with a massive drop in sales since the corona pandemic began last year. 

Wiener Zeitung also reports the number of personal bankruptcies in Austria fell by a quarter in 2020, to 7,300, while for the first time spending too much, rather than self-employment, has become the most common reason given for personal bankruptcy.

By July 17, Austria has to implement an EU directive which, among other things, provides for a reduction in the debt relief period for “honest entrepreneurs” from five to three years. It is up to the states whether they also allow this to apply to private debtors.

The state debt counselling organisation ASB is very much in favour of the reduction of the debt relief period being extended to private debtors, managing director Klemens Mitterlehner told Wiener Zeitung.

He said women were more often private debtors or guarantors of entrepreneurs, and unless the rule was applied to these categories, men would be more likely to get a three year period of bankruptcy, while women faced five years.  

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