Debate over quantitative easing reignites following president's remarks

SEOUL, April 26 (Yonhap) -- Discussions over a need to inject additional funds for corporate restructuring was rekindled Tuesday after the president insisted the move at least deserved serious consideration. "My position is that we need to positively review the plan at least once," President Park Geun-hye said while meeting with a group of chief editors from major news outlets here. "I will focus my efforts to direct ongoing discussions to that end in the future." The South Korean president was referring to the so-called Korean-style quantitative easing first proposed by the ruling Saenuri Party, in which the central bank will print additional banknotes to take over loans extended by policy lenders to local firms. This will allow state-run lenders such as the Korea Development Bank to lend more money to more firms, providing what the ruling party has called much-needed funds for corporate restructuring. However, the proposal was nearly withdrawn after the ruling party suffered a clear defeat in the parliamentary elections held earlier this month, grabbing only 122 out of the total of 300 seats in the unicameral parliament. In the April 13 elections, the main opposition Minjoo Party emerged as a new house majority with 123 seats. Prior to the parliamentary polls, the main opposition party had expressed its clear rejection of Korean-style quantitative easing. Following its victory, the party offered to cooperate with government-led corporate restructuring, but only on the condition that the move be preceded by measures to help those who might become unemployed in the process and that the restructuring process itself remains on what it considers the right track. Taking a cue from Park's remarks, the Saenuri Party may renew its campaign for quantitative easing, despite expected resistance from the opposition parties. Apparently staying more cautious, Bank of Korea Gov. Lee Ju-yeol said the central bank will do what is necessary, but within its legal boundaries. "Of course, corporate restructuring is a very important part of the economy and the BOK maintains a basic stance that it will take necessary steps when a need arises," Lee said earlier. Still, the top central banker expressed a view that no additional funds were needed for restructuring, at least for now. "Looking at current conditions in the financial market, I believe local firms face no significant difficulties in finding the funds needed for restructuring," he added. Both ruling and opposition lawmakers have noted that even allowing the central bank to provide additional liquidity to policy lenders will first require a revision to the law governing the central bank, which currently prohibits the BOK from purchasing securities from state-run banks. The opposition bloc, including the splinter People's Party with 39 seats in the new National Assembly set to begin late next month, has expressed concerns that such a revision to the law on the Bank of Korea may seriously undermine the independence of the central bank. bdk@yna.co.kr (END)