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Wall Street JournalGermany's Bankruptcy Wave Sends Shock Ripples Through Two Key Equity ETFs
Germany is on course for the highest corporate insolvency count in more than a decade, raising fresh questions about the resilience of the nation’s largest listed companies — and the ETFs that track them.
The latest data from Creditreform, cited by Reuters, paints a sobering picture of deepening financial strain across Europe’s biggest economy. For investors in the iShares MSCI Germany ETF (NYSE:EWG) and the Global X DAX Germany ETF (NASDAQ:DAX), those stresses may soon become harder to ignore.
• iShares MSCI Germany Index Fund stock is trading near recent highs. What’s next for EWG stock?
Corporate Failures Hit 11-Year High
Creditreform predicts that about 23,900 German companies will go bankrupt in 2025, an increase of 8.3% over last year and the most since 2014. The pace of deterioration has slowed, but the report marks a second successive year of economic contraction, rising costs, and shrinking access to credit.
Small and micro-enterprises, those with 10 employees or fewer, account for over 80% of all insolvency cases, emphasizing the vulnerability of Germany's SME backbone. While individually small, these firms supply, support and service many of the country's largest public companies.
This makes the insolvency spike relevant for ETF investors, as ripple effects-such as supply-chain delays, payment defaults and tighter credit conditions — can ultimately influence the performance of large-cap constituents inside both EWG and DAX.
Also Read: German Economy Is In ‘Free Fall’ From Self-Inflicted Policies
Two Lenses On A Weakening Economy
Although the ETFs track different indices, they together provide a comprehensive view of the sentiment towards German equities.
The EWG tracks the MSCI Germany Index and provides broad exposure to industrials, financials, autos, health care and consumer-oriented names. Those areas tend to feel the effects of domestic economic weakness more directly, making the fund particularly sensitive to rising bankruptcies and sluggish business activity.
By contrast, DAX, which tracks Germany’s flagship blue-chip index DAX (Deutscher Aktienindex), is more concentrated in multinational heavyweights. These firms benefit from global revenue streams, but are not immune from homegrown pressures, including high labor costs, energy burdens and softening domestic demand.
With corporate and consumer finances both weakening, the macro backdrop for the two leading Germany-focused ETFs is unfavorable.
Consumer Strain Adds A Second Shock
Financial stress in Germany is not confined to companies.
Private bankruptcies are set to increase by 6.5% in 2025, reaching their highest level since 2016, buoyed by over-indebted households, as well as a wave of job cuts and increasing unemployment.
For those ETFs that have exposure to banks, consumer discretionary names and domestic industrials, the pressure on households may further weigh down earnings expectations.
Outlook: A Tough Road Into 2026
Creditreform warns of Germany losing its competitiveness, weighed down by high costs, bureaucracy and persistent economic weakness. With no quick turnaround on the horizon, the investors in both EWG and DAX are facing a market increasingly shaped by insolvency risks, both corporate and consumer.
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