Lee vows preemptive measures to calm currency market

(ATTN: UPDATES with more remarks in paras 8-10; rival parties' reactions at bottom)
By Yoo Cheong-mo
SEOUL, Oct. 27 (Yonhap) -- President Lee Myung-bak said Monday that South Korea is capable of overcoming the ongoing financial crisis through a combination of appropriate policy measures, including tax cuts, deregulation, fiscal spending increase and sufficient supplies of foreign and local currencies.

In an address to the National Assembly, Lee declared that his government is
determined to provide unlimited currency liquidity in a "preemptive, sufficient,
decisive" manner until psychological unrest dissipates from the market, while
stressing South Korea, with about US$240 billion in foreign reserves, is capable
of tiding over the foreign currency liquidity problem.
The president also said he will strive to spread the hope of an "early economic
recovery" by further consolidating policy coordination with all countries across
the world through the upcoming Group of 20 financial summit and other
multilateral and bilateral diplomatic stages.
Notably, Lee vowed to strengthen financial cooperation with China and Japan and
seek to boost South Korea's role in the new international financial order as well
as in the restructuring of the International Monetary Fund and World Bank.
"Many people compare the current crisis to the foreign exchange crisis of a
decade ago. But I can confidently say that there would never be the outbreak of
another foreign currency crisis in South Korea," said Lee.
"The circumstances are entirely different from 10 years ago, as the crisis
originating from the U.S. and Europe is spreading across the world. Our
government will actively strengthen international policy cooperation, supply a
sufficient amount of liquidity and revitalize domestic consumption," said the
president.
Lee pledged that his government will drastically expand budget expenditures and
take other "preemptive" policy measures to stimulate domestic consumption in
anticipation of a slump in the real economy worldwide.
The president noted that falling prices of oil and raw materials will help the
nation improve its current account and foreign currency positions. "The current
financial market problems are rather psychological. The most formidable enemies
are an excessive reaction to market conditions and the spread of unfounded fears.
We should believe in our own potential capabilities," he said.
Lee displayed his strong intention to enhance the competitiveness of the nation's
financial services industry through sweeping industry-wide restructuring.
"The nation's backward financial industry should not be left uncontrolled and
neglected. Its entry barriers should be lowered but state oversight of their
asset soundness should instead be toughened."
Asking for nonpartisan and nationwide efforts to overcome the financial market
crisis, Lee requested extensive parliamentary support for his government's budget
plan for 2009 during the high-profile address.
He thanked the ruling and opposition parties for their decision to approve the
government's massive bank bailout plan. Lee's Cabinet last Tuesday approved the
Bank of Korea's plan to guarantee up to $100 billion in foreign-currency loans to
be raised by domestic banks through June next year. The bailout plan is subject
to parliamentary approval.
The president presided over an emergency economic policy meeting on Sunday,
instructing his Cabinet ministers to implement further tax reductions and expand
the government's fiscal expenditures to prevent the ongoing financial crisis from
spilling over into the real economy.
He also stressed concerted nationwide efforts to regain the confidence of foreign
and domestic investors in the South Korean economy and financial markets.
As expected, rival parties showed conflicting reactions to the president's address.
The ruling Grand National Party (GNP) praised Lee for presenting policy measures
to overcome the crisis, whereas the opposition parties criticized the president
for failing to clearly recognize the economic and market realities.
"President Lee's policies to expand supplies of foreign and local currencies and
boost domestic consumption through increased fiscal spending are particularly
meaningful," GNP spokeswoman Cho Yoon-sun said.
But the main opposition Democratic Party accused the president of failing to
apologize for his policy mistakes and called for an immediate replacement of his
economic policymaking team, led by Finance Minister Kang Man-soo.
ycm@yna.co.kr