Ger­many to ex­tend in­sol­vency mora­to­rium for virus-hit com­pa­nies

The Pak Banker - - INTERNATIO­NAL BUSINESS -

VI­ENNA: Ger­man coali­tion par­ties have agreed to ex­tend a freeze on in­sol­vency rules put in place to avoid a wave of cor­po­rate bank­rupt­cies due to the coro­n­avirus cri­sis, Fi­nance Min­is­ter Olaf Scholz said on Tues­day.

Speak­ing to re­porters in Vi­enna, Scholz said his cen­tre-left So­cial Demo­cratic Party (SPD) and Chan­cel­lor An­gela Merkel's con­ser­va­tive bloc sealed a com­pro­mise deal ahead of a coali­tion meet­ing sched­uled later on Tues­day. In March, the gov­ern­ment gave com­pa­nies that find them­selves in fi­nan­cial trou­ble due to the pan­demic a respite by al­low­ing them to de­lay fil­ing for bank­ruptcy un­til the end of Sep­tem­ber.

Jus­tice Min­is­ter Chris­tine Lam­brecht, a Scholz ally and SPD mem­ber, had sug­gested ex­tend­ing the mora­to­rium un­til the end of March 2021. But her plan drew crit­i­cism from Merkel's law­mak­ers who said the waiver should ex­pire at the end of this year.

Scholz did not give any de­tails on the agree­ment, but added that the deal would be an­nounced later. A coali­tion mem­ber with knowl­edge of the talks told Reuters that par­ties had agreed to ex­tend the in­sol­vency waiver un­til the end of this year for in­debted but still sol­vent com­pa­nies.

The freeze on the obli­ga­tion to file for in­sol­vency will not be ex­tended for in­sol­vent firms, the coali­tion source added. "We don't want to cre­ate zom­bie com­pa­nies," the coali­tion source said on con­di­tion of anonymity.

The coali­tion par­ties are also ex­pected to agree on Scholz's pro­posal to dou­ble the pe­riod over which state aid is paid un­der a gov­ern­ment short-time work­ing scheme to pre­vent un­em­ploy­ment surg­ing fur­ther dur­ing the COVID19 pan­demic. Short-time work, also known as Kurzarbeit, al­lows em­ploy­ers to switch em­ploy­ees to work­ing fewer hours or even none dur­ing an eco­nomic down­turn. It aims to stop im­me­di­ate shocks such as the coro­n­avirus cri­sis from lead­ing into mass un­em­ploy­ment.

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