Record number of bankruptcies during first quarter of 2009
The fall in consumption and the sharp growth in unemployment in Spain have led to the number of individuals and companies going into administration to go up four fold in the first quarter of 2009. There have been a record number of insolvencies – 1,588 – which is four times more than for the same period in 2008. If the rhythm of insolvencies and bankruptcies continues at the same rate economic forecasters believe that the number of bankruptcies for the whole of 2008 could be twice that of 2008 (2,902).
The statistics on companies going into administration published by the Spanish National Institute for Statistics (INE) show that the first quarter of 2009 has been the worst phase of the current economic crisis so far with an increase of 44% of companies going into administration compared to the last quarter of 2008. However, what is not clear is whether the worst phase is coming to an end or is set to continue.
Between January and March 2009 the number of individuals declaring themselves insolvent tripled compared to the same period for 2008 with a total of 200 insolvencies being declared. Companies and the self employed who went into administration went up by 278.3%, to 1,358 which is almost four times as many as a year earlier. Out of these 3 out of every 10 were involved in the construction or property sales sectors while the rest were in industry, energy with 17.8% coming from the commercial sector. The majority were either small or medium sized companies with a turnover of less than 2 million euros.
Out of the total number of bankruptcies 1.470 were voluntary (280.8% more than in the first quarter of 2008) 88 were forced (125.6% more). As far as the geographical location of companies and individuals going bankrupt 59.2% were concentrated in Catalonia, Valencia, Madrid and Andalucía.
The new law on bankruptcy which came into effect on 1st April 2009 has been ‘limited’ and has not been able to put a brake on the increase in the number of bankruptcies according to Gonzalo Aranzabal, from the law firm KPMG in declarations made to El Pais today. Aranzabal, believes one of the weakness of the new law is that it has not affected the situation of families and individuals who find themselves with more debts than they can cope with and it has not helped with judicial delays either due to the insufficient number of courts available to deal with the avalanche of applications for bankruptcy.
The Union of Consumers (UCE) has also asked for a law to be passed to deal with people who find themselves in too much debt destined principally at helping families. This law would outline the rights of citizens who find themselves in a situation of too much debt and who suffer pressure from banks and would be similar to laws that already exist in France or Germany.
According to UCE, the current law is based on helping companies. UCE maintains that not only is it too costly but that it involves an over complicated process and is not capable of helping families or individuals who are defenceless in the face of banks and other financial entities.