Hong Nam-gi Leadership Leaves Only Scars

Prime Minister Jeong's Stern Rebuke Over Emergency Disaster Relief Fund Dispute... Ultimately Accepts 'Universal Payment'

Hong Nam-ki, Deputy Prime Minister for Economy and Minister of Strategy and Finance

[Asia Economy Reporter Kwangho Lee] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, finally yielded to the scolding of Prime Minister Chung Sye-kyun. Regarding the novel coronavirus infection (COVID-19), he agreed to follow the ruling party’s proposal to provide emergency disaster relief funds to the entire population, not just the bottom 70% by income. Concerns have arisen that Hong’s leadership, who must lead the newly launched 'Economic Central Countermeasures Headquarters (Economic CCH)' next week to overcome the economic crisis triggered by COVID-19, has been damaged. Morale among Ministry of Economy and Finance officials has also significantly dropped after it became known that Hong even offered his resignation.

According to the ruling party, government, and Blue House on the 24th, on the 23rd, Prime Minister Chung issued a warning to the Ministry of Economy and Finance, which was at odds with the ruling party, and the ministry lowered its stance. In his closing remarks at the National Affairs Inspection and Coordination Meeting that day, Chung said, "I do not fail to understand the Ministry of Economy and Finance’s position concerned about fiscal soundness," but also pointed out, "It is by no means desirable that statements causing confusion among the public are reported in the media despite the government’s position being settled in broad terms."

In particular, although the Blue House had shared opinions and, after consulting with Deputy Prime Minister Hong, clarified the position that the government would accept a system allowing voluntary donations and participation by high-income earners if established by the National Assembly, he was enraged by media reports containing statements from some Ministry of Economy and Finance officials such as "It was an agreement between the ruling party and the Prime Minister, so the Ministry of Economy and Finance has nothing to do with it," and "The Ministry of Economy and Finance’s position has not changed." Prime Minister Chung instructed Kim Yong-beom, First Vice Minister of Economy and Finance, who attended the meeting in place of Deputy Prime Minister Hong, who was absent due to a local schedule, to "accurately convey my intentions to the Ministry of Economy and Finance" and ordered internal discipline.

In response, the Ministry of Economy and Finance issued a press release titled "Request for Supplementation and Prompt Processing of Emergency Disaster Relief Funds" that afternoon, stating, "The funds for the emergency disaster relief will be procured through government bond issuance, and legal supplements such as the enactment and revision of laws to collect donations will be pursued." The ministry explained, "This decision comprehensively considered the urgency of providing support as soon as possible and the political demands for 100% payment."

Although Deputy Prime Minister Hong agreed to accept the ruling party’s proposal, the biggest reason he showed reluctance until the end was that the funds had to be covered by borrowing. The budget required to provide emergency disaster relief funds to the entire population is about 13 trillion won. This is approximately 3 to 4 trillion won more than the 7.6 trillion won size of the second supplementary budget bill submitted to the National Assembly on the 16th for emergency disaster relief payments. In other words, about 3 trillion won in additional funds must be procured by issuing deficit government bonds, and it is analyzed that concerns about a rapid increase in the national debt ratio in a short period, which could affect the country’s credit rating, played a role given that a third supplementary budget is also anticipated.

A senior government official said, "It is not desirable to shake the economic team in a situation where we must overcome the economic crisis," adding, "Since Deputy Prime Minister Hong will lead the Economic CCH, succeeding the emergency economic meetings presided over by President Moon Jae-in, we must support him. Deputy Prime Minister Hong should also take a more proactive role as the economic commander."

Meanwhile, although the ruling party’s proposal was accepted after twists and turns, it is uncertain whether discussions between the ruling and opposition parties will accelerate. The opposition party has drawn a line against additional issuance of deficit government bonds and is requesting the total size of the second supplementary budget and tax law revisions necessary for donation tax deductions. The ruling party aims to pass the second supplementary budget bill by the 29th at the latest.

The Blue House is also considering invoking the president’s emergency financial and economic decree power if the conditions for payment remain uncertain until next month due to delays in bipartisan agreement. This is because if the ruling and opposition parties fail to reach an agreement by the end of the April extraordinary session of the National Assembly on the 15th of next month, the conditions for invoking the emergency financial and economic decree power may be met. According to the Constitution, the emergency financial and economic decree power can be exercised only when there is no time to wait for the National Assembly to convene.

This content was produced with the assistance of AI translation services.