ed Crisis in Europe
Korea can ill afford to remain complacent
Europe seems to have avoided the worst, at least for now, with a deal that saved the old continent from falling into a chain of state defaults.
Korea’s financial markets, one of the quickest-changing bourses in the world, either up or down, have already restored their pre-crisis stability. Finance Minister Bahk Jae-wan says, ``Koreans can rest assured, as its economy is in experts’ hands.”
We wish we could. Various situations tell otherwise, however. It’s not just because the European accord was just a stopgap measure but also because the Korean officials’ track records are far from reassuring.
True, Seoul has sharply enhanced its foreign currency liquidity through a sharp increase of currency swaps with Japan and China. Once burnt, twice shy, but the government’s preparedness deserves praises. The problem is not every crisis comes with the same face. Few can tell what would happen if the European banks withdrew their funds en masse.
It’s still not too late for the government to come up with devices to control the flows of foreign capital to keep the national economy, which is extremely vulnerable to financial turbulence overseas, from further gyration.
Most disconcerting in this regard is the behavior of the domestic financial industry. The Korean banks, brokerages and underwriters, capitalizing on the easiest business techniques of interest and commission incomes, are about to throw bonus and dividend parties instead of replenishing their capital base. They are even resisting calls for restraints, protesting they are not living in a socialist country.
For the banks to do this, they must cough up massive amounts of taxpayers’ money spent to bail out the shaky lenders from looming insolvencies in the past.
No less dangerous is an even further setback in the global economy as a result of the European belt-tightening. This requires the export-driven Korean economy to shift to economic policies bolstering domestic demand by focusing support on small- and medium-sized enterprises, including service providers. President Lee Myung-bak’s economic team, led by Bahk, needs to ask themselves whether they are going in this direction.
Koreans watching what’s happening halfway across the globe cannot help feeling bitter. The IMF ― that is, the United States and Europe ― are writing off half of Greece’s debt, following similar measures on other near-bankrupt sovereign borrowers of Latin American countries and Russia in the past.
We wonder where all the government negotiators have gone, who bragged about their bargaining skills more than a decade ago.
Koreans, who repaid their debt until the last penny, may be the most good-natured ― if not foolish ― people in the world. They must not allow any repetition of it, by their own government or foreigners.