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Germany to loosen insolvency rules as energy crisis hits hard

·1-min read
Meeting in Germany's lower house of parliament, the Bundestag, in Berlin

BERLIN (Reuters) - Germany's justice minister is planning a temporary relaxation of insolvency rules to help keep afloat companies that have fundamentally sound business models but are struggling with debts due to high energy costs, he said on Friday.

Marco Buschmann, whose portfolio includes insolvency rules, said his plan would exempt firms from the obligation to file for insolvency if an expert finds they have a "positive going concern prognosis" for four months, down from 12 months now.

Welcoming Buschmann's plan, restructuring expert Lucas Floether said: "The question of whether a company is financed through the next 12 months is currently difficult for many to answer."

The initiative comes as many German businesses struggle with rising energy costs and supply chain bottlenecks, which contributed to a 26% rise in insolvency proceedings in Germany in August, IWH economic institute said on Tuesday.

This week, toilet paper manufacturer Hakle, shoe retailer Goertz and car supplier Dr. Schneider filed for insolvency, and Economy Minister Robert Habeck said he could imagine parts of the economy stopping production due to rising energy prices.

Buschmann wants to implement his plan as soon as possible.

Since the Ukraine war began in February, the German government has already agreed three relief plans worth a combined 95 billion euros ($95.4 billion) to counter the energy price shock. ($1 = 0.9960 euros)

(Reporting by Christian Kraemer and Alexander Huebner; Writing by Paul Carrel)