Posted October. 27, 2008 09:10,
President Lee Myung-bak yesterday convened an emergency meeting of top economic advisers and policymakers on stabilizing the financial market and boosting the economy. The talks came three days after another meeting to review the nations worsening financial woes before he left for the Asia-Europe Meeting in Beijing Thursday. The Korean stock market collapsed yet again Friday even after President Lee pledged close cooperation with leaders from China, Japan and Europe to tackle fight the global financial crisis. Despite substantial progress at the summit, the market failed to respond to rising expectations.
External factors are largely to blame for the latest financial turmoil, but frequent policy failures of the government have undoubtedly exacerbated anxiety. The market seems reluctant to believe repeated government claims that the Korean economys fundamentals are strong. In times of crisis, the government put words before action and its inadequate response has undermined the effectiveness of its policies, thus resulting in loss of market confidence. It is time for financial authorities to do some soul-searching.
The discord between government policies and the market can no longer be addressed by conventional methods alone. The nations highest authority, the president, will apparently have to step up and save the day even if it means huge risk-taking. His speech on the budget slated for today at the National Assembly must be the starting point for restoring market confidence, the prerequisite to overcoming the crisis.
President Lee should ask for bipartisan support in the National Assembly and prompt approval of a bill on protecting savings, while acknowledging any shortcomings in the governments initial response to the financial crisis. At the same time, he must renew his administrations commitment to proactively respond to factors fueling fear in the market and bring concrete results through prompt implementation of policies. He must persuade all economic players to share the burden together.
In the emergency meeting yesterday, the government decided to unveil this week a comprehensive policy package including measures to stabilize interest rates, boost domestic demand, expand corporate investment, and create jobs. President Lee said, Measures for further tax cuts and expansion of fiscal spending must bring solid results so that the financial turmoil does not trigger recession in the real economy. It is commendable that the government broadened its scope to look at the entire economy instead of just focusing on the crisis.
Before President Lee delivers a specific message to the market, he must first check for any disparity between his perception of the market and reality. If the disparity is so wide that it could burden the economy, he must focus on reality in executing individual policies or appointing economic advisers. There is no reason for him not to replace his economic team if restoring market confidence is the goal.