Contrary to my belief, the German legislator seems to have understood the gravity of the situation with which the recent decision of the German Federal Tax Court (“Bundesfinanzhof” (BFH)) has left the turnaround community in dealing with companies in crisis. The German Bundesrat as well as the fiscal authorities reacted rather quickly, unlikely as it may have seemed.
After all these questionmarks, doubts and armageddon-foresights (cf. for February here) now that: Hope! First, we all survived the 15th of March 2017 – despite the doomsday-sayers, neither the debt-ceiling nor the rate-hike in the US nor the Dutch elections could derail the “economic train” which seems to get momentum even beyond Germany now. But, as always, I am getting ahead of myself. So, let’s see what’s behind the (German) curtain for this month:
In the end, the reform went through unexpectedly fast: After a first reading in the German parliament in January 2015 the intended reform of the German insolvency avoidance law has been put on the back burner due to discussions on possible fiscal privileges. Now, the Bundestag has adopted the reform rather suddenly on 16 February 2017 – without further discussion and without fiscal privileges.
Germany’s economy seems to get stronger by the month – falling unemployment, rising GDP, governmental surplus, you name it. So, is really everything glossy and any other view merely a doomsday-sayer’s paranoia? Let’s check:
In a resolution, published on 7th February 2017 (though already passed on 28th November 2016), the German Federal Tax Court (“Bundesfinanzhof” (BFH)), decided that the so-called “Decree on Turnaround” (“Sanierungserlass”) issued by the Federal Ministry of Finance (“Bundesministerium der Finanzen” (BMF) contravenes principles of the lawfulness of the administration and is therefore nil and void. Now, so-called “turnaround-profits” might be taxed, a fact which seriously endangers future turnarounds.
According to preliminary figures, German GDP increased by 1.9% in the whole of 2016 and by around 0.5% in the last quarter. Main driver of growth were exports and state consumption which increased from 2.7 to 4.2% in one year. And this rise in state consumption is mainly attributed to the costs for the refugees which are assessed to be around Euro 22bn in the last year. This figure puts the budget-surplus of around 6bn into perspective…
After a rollercoaster rarely seen in recent history, the year ends relatively patchy for the German economy:
After the Bavarian Minister of Justice had already proposed a suspension of the obligation for at timely insolvency filing in cases of natural disasters in the summer of 2016, the Ministerial Conference of the State Ministers of Justice now followed this proposal in November 2016. They agreed that the three-week insolvency application period of § 15a InsO does not take into account the special situation surrounding natural catastrophes. In the short time frame foreseen by § 15a InsO, it is often not possible to clarify as to whether the damage inflicted can not be offset by various compensations (e.g., by insurance companies).
Until 8 November the month began rather “ordinary” and did not continue the rebound from September. Obviously, everybody was waiting for the outcome of the US Presidential elections. And then the unthinkable (at least from the viewpoint of the MSM) happened – Trump was voted President. And then, again, the unthinkable happened: stocks did not only NOT crash but – especially in the US – started a rally rarely seen.