Germany's Small Business Owners Fight To Survive Amid Fears Of A Wave Of Insolvency

BERLIN — Since 1913, beer from the tap of the Metzer Eck pub has flowed through two World Wars, a flu pandemic and the Soviet occupation of East Berlin, which came and went over mere decades of the establishment's history.

Through 108 years of turmoil, four generations of the same family have kept this pub going in the German capital's Kollwitz neighborhood, serving its trademark sauerkraut and schnitzel alongside countless pints of local pilsner. But it all came to a halt last year, when government-ordered lockdowns forced pub owner Sylvia Falkner to shut the doors for the first time to help curb coronavirus infections.

"Before the second lockdown, I took out credit as a buffer. I've managed because of that, but the aid I'm getting is going straight into paying off that debt," says Falkner. She has taken advantage of the government's worker furlough program and low-interest loans.

"I've put a little money aside, but I'm worried about the lockdown being extended continuously — I have no income," she says.

"If I can reopen in the summer, I should be okay, although we won't be back to full business because the tourists won't be here," she says. "We're a century-old bar and a piece of the city, but I have to say, honestly, that if someone offered to buy the business outright, I'd sell. I'm so tired."

She's far from alone. Tens of thousands of German companies in the service, retail and travel industries have teetered on the edge of bankruptcy since the pandemic began.

In March of last year, the government announced a freeze on the country's strict insolvency rules, to prevent bankruptcies in the wake of the first wave of the virus. The government extended that freeze to April 30 of this year.

Now, with the freeze about to expire, economists worry about a surge of bankruptcies once the German government again requires hopelessly indebted businesses to file for insolvency.

Arndt Geiwitz, managing director of SGP Schneider Geiwitz, one of Germany's largest bankruptcy administrators, says the government needs to do more to prevent companies from going under.

"Because these companies have been forced to shut for the good of everyone, everyone should bear the costs," he says. "The government should be doing what other countries are doing — giving companies grants rather than loans — because the latter increases the risk of becoming zombies."

Geiwitz worries about a buildup of "zombie businesses" — those which, on paper, appear to be afloat but are for all intents and purposes bankrupt. They are being propped up by government intervention and what Geiwitz sees as a traditional German fear of admitting defeat.

Despite suffering the worst recession since World War II, the number of bankruptcies in Germany fell to its lowest level in 21 years in 2020. Experts like Geiwitz say this figure is a result of the German government's freeze on bankruptcy declaration rules, and that once the freeze ends this week, there will be a wave of bankruptcies throughout several sectors of the German economy from zombie businesses.

"Until recently, filing for bankruptcy in Germany was like committing suicide," he says. "You were ostracized by society, both in your professional and personal life."

This is one of the reasons, says Geiwitz, that start-up culture is more successful in the U.S. than in Germany, and it also helps explain why few German companies have filed for bankruptcy.

One business that has survived so far is Barcomi's, a popular café in Berlin's Kreuzberg district. But owner Cynthia Barcomi, an American expatriate, says it hasn't been easy. She was forced to close the café's companion deli in downtown Berlin.

"It was just too risky for me," says Barcomi. "And I was afraid that the one shop would bring this shop down. It was kind of like that film that James Franco was in, when he gets his right arm caught between a rock and whatever. Well, for me, the deli was kind of like the right arm. And I felt like it's better to cut it off, let it be, and save this space."

Barcomi says she went through a period of grieving, but the stark reality of the situation made her and her team snap out of it.

"When you're running a small business and you're confronted with sort of like an obstacle course, different hurdles, you need to use those things to be creative. And the problem is, if you can't be creative, you will go down."

Barcomi's team quickly set up a delivery service and have been able to reopen the café to socially distancing customers. They've refused to become zombies — she says the most important thing they've done since the pandemic started is survive.

Esme Nicholson contributed to this story from Berlin.

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