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German insolvencies set to rise as Covid aid ends and economy stagnates

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German insolvencies set to rise as Covid aid ends and economy stagnates

German companies are expected to go bust at a higher rate this year following a sharp increase in insolvencies in 2023, as businesses hit by high energy costs and the end of pandemic aid throw in the towel.

Restructuring experts warn that many “zombie” companies kept afloat after the coronavirus pandemic by generous government aid and a suspension of the obligation to file for bankruptcy — which caused insolvencies to drop to unusually low levels — are now collapsing.

Since the start of this year, several well-known German companies — including the department store chain Galeria Karstadt Kaufhof and Hamburg-based bag maker Bree, whose customers include Chancellor Olaf Scholz — have filed for insolvency.

The ranks of struggling companies have been swelling because of Germany’s economic stagnation, combined with high interest rates, rising wages, elevated energy prices and a government budget squeeze. This is expected to push insolvencies up by between 10 per cent and 30 per cent this year, experts warn, taking them above pre-pandemic levels.

One such company is 85-year-old wooden toymaker Haba. Delivery failures caused by “wrong decisions” on IT systems at Haba’s online children’s clothing operation compounded the “heavy burden” the company was already enduring from the soaring cost of energy and wood, according to spokesperson Ilka Kunzelmann. 

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Ultimately, it was too much for the family-owned business based in Bad Rodach, a spa town in central Germany. Haba was granted insolvency by a court in December and expects to emerge in March after it has shed about a third of its 1,500 employees, shut its online clothing arm and sold a school furniture factory.

Haba, a wooden toymaker in Bad Rodach, central Germany, was granted insolvency by a court in December, and expects to emerge in March after shedding about a third of its 1,500 employees © Dreamstime

Steffen Müller, head of bankruptcy research at the Halle Institute for Economic Research, said the monthly rate of German insolvencies it tracks, which excludes unregistered companies that have few employees, has risen since last summer above the pre-pandemic average for the first time. In December, it hit its highest level for at least seven years.

“For the next two to three months we will definitely see higher insolvency numbers, you can see that from the early filing numbers,” said Müller. “The government gave a lot of aid to firms that had low productivity before the pandemic. That prolonged their lives. But now they have to repay the aid and many are struggling to do so.”

Figures released last week by the federal statistics agency showed the number of companies filing for bankruptcy in district courts had increased more than 24 per cent in the 10 months to October, compared with the same period of 2022. 

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Germany’s economics ministry said the business environment was “challenging” but played down the scale of the problem, saying: “In the longer-term perspective, and in comparison to the period before the pandemic, corporate insolvencies are currently not at a noticeably high level.”

Wolfgang Steiger, head of the opposition CDU party’s economic council, blamed the government’s “disastrous economic policy” for causing Germany’s insolvency rate to rise faster than many other countries. “High costs for energy and labour, which are a home-made problem, combined with the skills shortage, are causing financial distress for an increasing number of companies in Germany.”

The German economy contracted 0.4 per cent in the third quarter compared with the same period a year earlier after sharp falls in retail sales, exports and industrial production. 

Growth in the country is expected to pick up to 0.6 per cent this year, according to the OECD. But it would still be one of the world’s weakest large economies and several analysts have cut their forecasts since the government slashed spending plans to fill a €60bn hole in its budget left by a constitutional court ruling against off-balance sheet funds.

As part of the budget cuts, Berlin this month ended the temporary low rate of VAT on restaurant meals it introduced during the pandemic, prompting warnings that thousands of eateries would go out of business. More than 15,000 restaurants, snack bars and cafés in Germany are at risk, according to data provider Crif, which estimated that insolvencies in the sector would rise again this year after jumping 36.5 per cent to 1,600 last year.

Hackescher Market in Berlin
Hackescher Market in Berlin: Berlin has now ended the temporary low rate of VAT on restaurant meals it brought in during the Covid-19 pandemic © Carsten Koall/Getty Images

The German insurance association recently warned of a “massive increase in payment defaults” after credit insurers paid out more than €1.2bn in 2023, up 44 per cent on 2022. “We see significantly more and greater damage from insolvencies and delayed payments than in the previous year,” said the GDV’s Thomas Langen, who predicted German insolvencies would rise 10 per cent this year.

Jonas Eckhardt, specialist at restructuring advisers Falkensteg, said the weak economy was making it harder for companies to pass on higher energy, labour and raw material costs via higher prices. “The big question is — how much of this can I offload on my customers?”

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He is predicting that insolvencies will rise more than 30 per cent in 2024 among companies with annual revenues in excess of €10mn.

The sharp rise in interest rates by the European Central Bank to tackle inflation has also made it harder for companies to emerge from insolvency by finding new investors, Eckhardt added. Only 52 per cent of companies could be saved through insolvency at the end of last year, down from 62 per cent two years ago, according to data from Falkensteg.

“Investors have become more risk-averse, and are holding back,” he said. “Those that still want to [take over an insolvent company] face higher financing costs. So it’s a high-risk transaction.”

This drying-up of investment and financing has hit younger, more vulnerable companies. Almost 300 German start-ups filed for insolvency last year, a 65 per cent increase from 2022, according to data provider Startupdetector. Among them was solar-powered car company Sono Motors, online trader Social Chain and anti-fraud software maker Fraugster. 

Many of the bigger companies going bust last year were fashion retailers, transport providers, real estate companies and auto suppliers. There were also high numbers of collapses among German care homes and clinics as they struggled to pass on higher wage and energy costs to the health insurance system. 

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Bar chart of Insolvencies expected in 2024 (% change from 2019) showing Some countries have bankruptcies rising far above pre-Covid levels

Bankruptcies have been rising across much of the world, according to German insurer Allianz, which forecast a 6 per cent increase in global insolvency numbers last year and a 10 per cent rise this year.

“Germany was lagging behind other countries, such as France, the Nordic countries and the Netherlands,” said Maxime Lemerle, lead adviser on insolvency research at Allianz. “But it is catching up with the trend definitely to the upside.”

While it is yet to match the high levels of corporate distress after the 2008 financial crisis, Lemerle said the recent rise of bankruptcies in Germany and elsewhere was now “more than a normalisation, but not yet a tsunami”.

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2026 Midterms Tracker: The Key Senate and House Races

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2026 Midterms Tracker: The Key Senate and House Races

Control of both chambers of Congress is up for grabs this fall. Democrats’ chances to seize power from the Republicans hinge on a narrow set of battleground seats and states.

There will be elections in every one of the 435 seats in the House of Representatives and 34 in the Senate in November. But only a small fraction are truly competitive. Here are the races expected to decide the midterm elections, according to the most recent ratings by the Cook Political Report.

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House

35 competitive races

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The magic number to win the majority in the House is 218 seats.

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Right now, Democrats would need victories in 11 of the 18 races that Cook rates as tossups to clinch the majority, so long as they also secure seats leaning or likely Democratic. In order for Republicans to keep control, they need to win eight of the tossup races, plus the ones that lean in their favor.

The political environment favors Democrats. They have been winning in special elections — and won governors races last year — by wide margins. President Trump is increasingly unpopular as gas prices remain high and the Iran war drags on.

But the 2026 congressional map has been remade through the nationwide redistricting wars to favor the G.O.P. And the maps remain in flux as some Republican states, especially in the South, are pushing to erase even more Democratic districts.

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The most competitive House races

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District Incumbent Rating ▾
Ariz. 1 None Tossup Polls ›
Ariz. 6 Juan Ciscomani R Tossup Polls ›
Calif. 22 David Valadao R Tossup Polls ›
Colo. 8 Gabe Evans R Tossup Polls ›
Fla. 25 Jared Moskowitz D Tossup
Iowa 1 Mariannette Miller-Meeks R Tossup
Iowa 3 Zach Nunn R Tossup
Mich. 7 Tom Barrett R Tossup Polls ›
N.J. 7 Thomas Kean Jr. R Tossup Polls ›
N.Y. 17 Mike Lawler R Tossup Polls ›

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Note: “None” indicates races where the current representative announced retirement or the incumbent lost their primary.

The House battleground is likely to change several times between now and November. Some House races that are less competitive now may become so this fall. And some races currently seen as competitive seats are likely to fall off the map entirely, as incumbents or challengers fade.

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Senate

10 competitive races

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Republicans currently hold 53 Senate seats. Democrats would need to flip four states, while defending their two most vulnerable seats in Michigan and Georgia, in order to win the majority.

Democrats would need to win 51 seats because in a 50-50 Senate, Vice President JD Vance would cast the tie-breaking vote for Republicans. It’s a tall task that would require Democrats to win seven of the eight races that Cook rates as tossups or leans, including at least two seats in states that Mr. Trump won by double digits in 2024 — between Alaska, Ohio and Texas.

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The most competitive Senate races

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Note: “None” indicates if a current senator announced retirement or the incumbent lost their primary.

The odds are one reason Democrats have pushed to compete for seats in states like Texas, Iowa and Nebraska, even though these races more strongly favor Republicans. In fact, in Nebraska, the party has rallied behind an independent candidate, Dan Osborn, as the best shot to unseat a Republican.

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Senate races that could become more competitive

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State Incumbent Rating ▾
Iowa None Likely R Likely Rep. Polls ›
Neb. Pete Ricketts R Likely R Likely Rep. Polls ›

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Xi’s last frontier: China’s plan to transform its west

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Xi’s last frontier: China’s plan to transform its west

Additional contributions by Haohsiang Ko, Chris Campbell and Annalee Mather.

The location and route of the tunnel system for the hydropower dam are indicative, as official designs have not been made public. While the route shown is approximate, it follows an elevation change consistent with the proposed plans for the facility.

Mehebub Sahana, an environmental geographer at Manchester University, and Ye Huang, a researcher at Global Energy Monitor, assessed possible locations for the facility and reviewed satellite imagery to determine whether recent construction activity was linked to the project.

Images of major infrastructure projects included at the top of the story, in the order in which they appear: China News Service/Getty Images; CFOTO/Sipa USA; Xinhua/Shutterstock; CFOTO/Sipa USA; Reuters; Xinhua/Shutterstock; CFOTO/Sipa USA; CHINE NOUVELLE/SIPA/Shutterstock. Videos from ski resorts in Xinjiang were sourced from China’s Xiaohongshu social media platform.

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One by one, U.S. civil rights agency dismantles tools to fight discrimination

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One by one, U.S. civil rights agency dismantles tools to fight discrimination

The EEOC was established by Title VII of the Civil Rights Act of 1964 to address entrenched discrimination in employment.

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In 1966, the newly-established Equal Employment Opportunity Commission issued a rule to tackle entrenched discrimination on the job.

Every year, companies with a hundred or more workers would turn over to the government information about the race, ethnicity, sex and job categories of their employees.

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This EEO-1 data, as it’s known, has helped the federal agency figure out where people of color and women are not getting hired or promoted. Over decades, the EEOC’s work has led to settlements worth billions.

Now, as part of a realignment of civil rights enforcement under President Trump, the EEOC is seeking to end its annual data collection while also getting rid of a 1979 regulation that allowed employers to take certain steps to address race and gender imbalances revealed by the data.

Together, the moves would mark an about-face in the civil rights agency’s efforts to fulfill its mission.

Andrea Lucas, the Trump-appointed chair of the EEOC, did not respond to NPR’s questions about the two proposals, which have been submitted to the White House for review.

But in interviews and public remarks, Lucas has repeatedly warned that programs or policies aimed at helping specific groups, such as Black people or women, are unlawful under Title VII of the Civil Rights Act of 1964 if they exclude others.

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“Regardless of what has happened before, the way to stop discriminating based on race is to stop discriminating based on race. The end. Full stop,” Lucas said at the Fortune Workplace Innovation Summit earlier this month. “I think that that’s a more beautiful vision of our country, and I think it’s consistent with the text of the statute.”

A roadmap for addressing discrimination

The 1979 regulation the EEOC seeks to rescind was issued with this very dilemma in mind: Can a company remedy discrimination by giving special consideration to those who were deprived of opportunities in the past?

The answer back then was yes. The agency gave the go-ahead for mentoring programs and even hiring targets.

“The EEOC says you can take some of these voluntary efforts, even though they will be race- or gender-conscious,” says Chai Feldblum, who served on the commission during the Obama and first Trump administrations. “This is the EEOC giving employers the roadmap of how they can take race and gender into account in a positive way and not violate the law.”

The guidelines, issued in January 1979, made clear that companies first had to document a problem, and then come up with a reasonable and time-limited plan for how to increase the number of minorities or women in their ranks.

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Five months later, the Supreme Court embraced that roadmap. In a 5-2 decision known as Weber, the court found that an affirmative action plan to remedy past discrimination was lawful provided it did not “unnecessarily trammel the interests of white employees” and that it was temporary.

In 1987, the court issued another decision, known as Johnson, extending protection to efforts aimed at helping women.

Now known as the Weber-Johnson standard, it’s still the law regardless of what happens with the EEOC’s 1979 regulation, says Feldblum. But for how long, she’s not sure.

“I think the Supreme Court is just waiting for a case that might allow them to overturn those two important cases,” she says.

How data has helped root out discrimination

The more imminent change, assuming the EEOC’s proposals go forward, is the demise of the agency’s annual collection of employee demographics. Usually, the data collection begins in late spring. So far this year, there’s been no word of it.

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Since the 1960s, the EEOC has recovered billions of dollars for workers who have suffered discrimination on the job, and in many cases, EEO-1 data played a key role.

“It’s one of the first things that you can look at as you’re trying to learn more,” says Karla Gilbride, who served as the EEOC’s general counsel during the Biden administration.

Protecting U.S. workers from unlawful discrimination — already a hard task — could become significantly harder if the government no longer has that data within arm’s reach, Gilbride says. Having to subpoena data would make enforcement far more laborious and less efficient.

A lawsuit against Bass Pro Shops

Consider the lawsuit against Bass Pro Shops, first filed in 2011.

The EEOC alleged the company, formally known as Bass Pro Outdoor World, discriminated against Black and Hispanic job applicants by not hiring them — not just at one store, but across the country, even in places with sizable Black and Hispanic populations.

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“Store by store by store, sort of the same idea, where you had areas that had a significant number of Blacks and Latinos, and either zero or very few at the stores,” says David Lopez, who was the EEOC’s general counsel at the time and now leads the Civil Rights, Migration and Workplace Law Initiative at Arizona State University.

A Bass Pro Shops Outdoor World retail store in Irvine, Calif.

A Bass Pro Shops Outdoor World retail store in Irvine, Calif.

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Jeff Gritchen/MediaNews Group/Orange County Register via Getty Images

The EEOC saw that pattern because it had Bass Pro’s demographic data on file. Government investigators could easily compare the outdoor gear shop to other retailers in the same counties. They could also compare Bass Pro’s workforce to the available pool of workers in the surrounding areas.

While the data by itself could not prove discrimination, Lopez says it was a green light to agency investigators to dig further.

“Because they had a reason to investigate, they were able to discover that there were managerial comments that were reflective of discriminatory animus, that they were looking for a certain type of person,” says Lopez.

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Someone who was white, according to the government’s complaint.

Bass Pro called the allegations “threadbare” and accused the government of merely relying on “a handful of isolated incidents of alleged inappropriate behavior.”

EEOC investigators later bolstered their case, identifying implicated managers and job applicants by name and compiling a list of dozens of Bass Pro stores with a low representation of Black and Hispanic employees.

Finally, in 2017, the company settled for $10.5 million. Bass Pro did not admit to any wrongdoing, but agreed to appoint a diversity director and to make good-faith efforts to recruit and hire non-white candidates.

Lopez considered the settlement a big win, one of many he oversaw in his time at the EEOC that were built on data.

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“You can have a hunch, but there’s nothing like the cold, hard numbers,” he says.

Agency chair says data has been misused

Early indications of the EEOC’s plan to stop gathering data came a year ago.

In announcing the opening of the 2025 data collection period, Lucas posted a message warning employers of their obligations under federal civil rights law.

“You must not use the information collected and reported in your organization’s EEO-1 Component 1 report to justify treating employees differently based on their race, sex, or other protected characteristic,” she wrote.

In an interview with NPR earlier this year, Lucas explained her missive. She said a number of companies have been misusing the data — including in ways that have hurt white people and men.

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Lucas believes the only people who should know the gender and race of a company’s employees are its lawyers and human resources staff. Instead, after the 2020 murder of George Floyd by a white police officer, a number of companies published their demographic data as part of public commitments to address the lack of diversity within their ranks.

Equal Employment Opportunity Commission chair Andrea Lucas is changing the priorities of an agency that had long focused its efforts on protecting vulnerable and underserved workers.

Equal Employment Opportunity Commission chair Andrea Lucas has served on the commission since 2020, appointed by President Trump.

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Elizabeth Gillis/NPR

Subsequently, she contends, companies began making decisions about whom to hire, promote and interview for jobs based on sex or race, noting some even gave hiring managers financial incentives to hit diversity targets.

That use of demographic data crosses the line, she says. “All it has to do is motivate — in whole or in part — your decision making, and you’re into unlawful territory.”

Lucas declined to single out any company by name, citing the confidentiality of agency investigations. But according to court documents, the EEOC has accused Nike and The New York Times of discrimination against white employees and job applicants. The two companies are among many that published their demographic data along with their diversity-related goals for several years.

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A focus on data in select cases

Paradoxically, Lucas has at times talked up the importance of data.

“There is no other way to protect victims of harassment and discrimination unless you collect information about them,” she said while speaking in April at a conference at Harvard organized by the Brandeis Center, an independent civil rights organization.

In that instance, she was defending the EEOC’s subpoena, requiring the University of Pennsylvania to turn over employee information that the agency doesn’t routinely collect: the names, addresses and phone numbers of Jewish employees who may have witnessed antisemitic acts on campus.

The university has, so far, refused to comply with the subpoena, noting in court filings that it echoes terrifying periods of history for Jewish communities.

“Driving a car without a dashboard”

The profound changes underway at the EEOC have kept David Cohen busy. The president of the management consulting firm DCI Consulting has fielded many calls from confused clients, wondering whether the work they’ve been doing to promote equal opportunity should continue.

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For now, he’s telling clients that keeping track of their employee demographics is a smart business move, whether the government requires it or not.

Without it, he says, a company has no way of knowing if it has a problem — whether it’s recruiting from too narrow a pool, or has a bad manager somewhere, or is screening out qualified candidates for no good reason.

“It’s like you’re driving a car without a dashboard. You have no idea what’s going [on]. Am I speeding? Am I not speeding? Is my check-engine light on?” he says. “You have nothing.”

He’s been reminding clients that while priorities have shifted at the EEOC, federal civil rights laws haven’t changed.

“Stay within the law, and you will be okay,” he says.

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