(EDITORIAL from the Korea Times on Feb. 20)

Reemerging financial jitters
New economic team ought to change policy, approach

After a brief, relative calm, the domestic financial markets are shaking again,
giving rise to a bunch of crisis theorists.

The "triple weakness" in currency, stock and bond markets has pushed up the
country's so-called credit default swap premiums, an indicator of a nation's
credit risk, to levels higher than even far smaller economies in Southeast Asia.
If the epicenter of the first crisis about six months ago was across the Pacific,
this time it has come across the Eurasian continent, particularly the former
socialist block of Eastern European countries, which have funded their economic
transition boom with excessive borrowing from their richer Western European
counterparts.
So Finance Minister Yoon Jeung-hyun and Bank of Korea Governor Lee Seong-tae were
right when appearing side by side at the National Assembly Thursday they brushed
aside concerns about another crisis as grossly exaggerated, if not completely
groundless rumors.
Their analysis of causes behind resurgent financial unrest, which also include
the rather cold market response to the U.S. bailout plan and General Motors
possible filing for bankruptcy protection as well as North Korea's security
threats, were also correct. To sum up, the revisiting financial unrest appears to
be mainly due to external factors and non-economic elements.
True, Korea cannot remain as an exception from the worldwide economic turmoil as
a member of the global village, as the officials said. The problem, however, is
why this country is especially vulnerable to external shocks and what it should
do to not just calm down ongoing jitters but also strengthen its economic
physique to prevent future ones.
Direct intervention in the markets with the aim of bolstering the local
currency's value to a publicly pronounced level has proved to be an ineffective
??? if not downright foolish ??? step by the first economic team of President Lee
Myung-bak. At the core of problem is the nation's undue foreign debt, which is
almost the largest in Asia.
So the second team is advised to clearly make public the financial situation
facing the nation, such as its short- and long-term external liabilities by their
maturities, and lending sources to help ease unnecessary unrest and suspicions.
It then ought to take some preemptive steps to secure foreign currency by
extending and expanding currency swap accords with the United States, Japan and
China. A more fundamental solution should be found in reconsidering the Lee
administration's economic and other policies and rectifying problems in them.
Watching the government conduct its economic policies in its first year, one can
find dishearteningly little changes before and after the global crisis happened.
While all major governments are breaking away from market-worshipping
deregulation to government-centered supervision, Seoul is singly noticeable for
its persistent march toward deregulation and privatization.
Finance Minister Yun is calling for the formation of a massive supplementary
budget, which itself seems inevitable, but he still sticks to tax cuts and hefty
spending on non-essential social infrastructure construction.
The widely rumored "March crisis" resulting from a mass exodus of Japanese funds
may not come. March, however, could prove to be the most difficult month for the
government, as most of the 2009 college graduates join the already-snowballing
rank of unemployed, and Pyongyang test-fires missiles. Without fundamental
changes in economic and diplomatic issues, crisis here may not come from without
but from within.
(END)