FSC decides to continue monitoring finance market trend

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Finance Services Commission(FSC) started to monitor international finance market trend last year and is planning to keep this regime. There is certain reason since the global market is unstable dealing with serious sovereign debt crisis.

SFC clarified in ‘Europe finance crisis status and major risk factor check’ report announced on May 21, current Europe’s financial crisis is related with real market recession, it is tough to resolve in a recent period.

Political conflict betweenGermany and France just let jitters increase over how Europe’s banking system would be affected by an exit ofGreecefrom the eurozone. What’s more serious is the fact that the risk will spread to other countries including Korea.

SFC expected that after the Greek election next month, the new cabinet would turn into easing austerity or request changes of bail-out terms, it seems highly likely to cause conflicts with EU, IMF, and ECB.

The risk factors ofEurope’s financial crisis are the difficulty of recovery because of continuing austerity of nations in the real market and the concern that might fall into double-dip since it is hard to ease the internal imbalance. It is also possible a considerable number of member countries might not comply with the new Fiscal Compact due to increasing unemployment rate and deteriorating fundamentals.

At fiscal prospects, the flow of working on deficit-reduction, slack in business, decrease in tax revenue to the increased deficit and rising interest rate of sovereign-debt leading to an increase in fund-raising expense with Spainas the center are the other risks.

There is another possibility that fiscal crisis will deepen if global credit appraisers lower the eurozone contries’ sovereign-credit rating. Then in will be difficult to force fiscal retrenchment and recent incidents such as change of government in France, publication of zero interest rate bond in Germany weakens the power to go with the new fiscal compact.

Instability of eurozone might cause the ECB’s sharp deleveraging. The damage in global market is inevitable, however, it seems not as serious as the lyman tragedy.

Although Korea’s foreign loan status has been improved as non-european funds fill in the vacancy of european funds, it still needs to be observed carefully to prevent critical situations.

JungHwa Han(g.fire@ymail.com)

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