Spain Leads EU Bankruptcies as Post-Pandemic Aid Cuts Expose Business Fragility

The end of aid exposes the debacle: bankruptcies surge 195% and Spain is Europe's weakest link

The end of ELbichito aid has revealed the true health of the Spanish business fabric: the worst in Europe. According to Brussels data, bankruptcies in Spain increased by 195% compared to 2019; since Sánchez took office, by 211%. This is not an isolated figure: insolvencies among self-employed workers grew by 534% in 2023, and insolvency proceedings for micro-enterprises surged by 5,375% in just two months of 2024.

Zombie companies and withdrawal of stimulus

The diagnosis is almost unanimous: during the pandemic, many companies were artificially supported by ICO credits and ERTEs (temporary employment regulation files). With aid withdrawn, inflation and interest rate hikes wiped out companies that did not generate real income. The Financial Times already warned that insolvencies in the EU reached eight-year highs. In Spain, the collapse hits SMEs with special virulence: 69% of closures correspond to companies with fewer than five employees.

The employer association Cepyme estimated 406,000 SMEs closed 2025 at a loss, and the total number of active companies fell to the lowest level since the Great Recession. The most chilling figure arrived in March 2024: the start of insolvency proceedings for micro-enterprises rose by 5,375% in two months.

Brussels tightens, bureaucracy chokes

While the productive fabric bleeds, Brussels has taken Spain to the Court of Justice of the EU (CJEU) for failing to adjust VAT thresholds for SMEs, being the only EU country not applying the community regime. The tax burden on small businesses is, according to a report by the IE and the Tax Foundation, double that of Sweden. The Government, for its part, justified the redirection of European funds arguing that companies “do not need help.” A statement that, seeing the figures, borders on cynicism.

The combination of high interest rates, cost inflation, and a hostile regulatory environment has caused an avalanche of collective dismissals (ERE): only in July 2023, 4,800 people lost their jobs through collective dismissal, the highest figure since 2013. Restructurings increased by 50% in 2023, and labor experts predict the trend will continue.

The irony of the official narrative is massive: economic recovery is sold while the number of companies plummets and self-employed workers—who sustain 89% of tax revenue—disappear at a rate unseen since the 2008 crisis. The business collapse is not an accident: it is the logical consequence of killing the patient so the diagnosis looks good.

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