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European business insolvencies in wobbly recovery, says survey

COMPANY insolvencies in Western Europe are beginning to make a tentative recovery following the twin financial storms of the subprime crisis and the subsequent shock waves in 2012 and 2013.

That’s the message to emerge from the latest research from economists at global credit insurance outfit Coface.

It found that the average drop of 9% witnessed in 2014 will continue with a 7% fall in 2015. Insolvencies are continuing to rise in Italy and Norway, while a timid recovery in the eurozone in countries including Germany, Belgium, Finland, France, the Netherlands, Portugal, as well as in the UK, Denmark and Sweden.

The dynamics of recovery differ across countries and current insolvency levels are not yet comparable to pre-crisis levels, the report found. The worst affected countries are Italy, Portugal and Spain, where high levels of unemployment continue to dampen growth.

But while the outlook is improving, this is mainly due to private consumption within the eurozone’s GDP increasing by 0.3% in Q2 2015. Coface forecasts that growth in the eurozone will hit 1.5% in 2015 and 1.6% in 2016, up from 0.9% in 2014.

The zone’s importing countries have also benefited from the depreciation of the euro and the fall in oil prices.

Coface sounded a note of caution about low investment levels in the eurozone, which were still below pre-crisis levels.

It put this partly down to “poor dynamism in relation to anticipated demand”, which had discouraged business investment.

Conditions for more growth in the eurozone will be “particularly favourable” for the Netherlands, Spain and Portugal, while the expected drops will be less marked in Germany at -2% and in France at -3%.

Meanwhile, Italy and Norway, the two countries still in the red in 2014, will remain in the fiscal doldrums in 2015.

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