[위크리뷰]’Self-Employment Loss Compensation’ Suddenly… Treasury market fluctuations due to fiscal deficit concerns

Deputy Prime Minister Hong Nam-ki’Considering Financial Situation and Financial Conditions’
The ruling party doesn’t pay 24 trillion dollars a month
Funding for the purchase of government bonds from the BOK?… Soaring government bond rates

[아시아경제 김은별 기자] Despite the negative position of the Ministry of Strategy and Finance, Prime Minister Jeong Sye-gyun officially reviewed the sales damage compensation plan for small business owners and self-employed persons, and the’self-employment loss compensation system’ is rapidly rising. The ruling party is pouring out various bills a day after Prime Minister Chung’s remarks came out. Deputy Prime Minister Hong Nam-ki and Minister of Strategy and Finance said that the financial situation and financial resources should be considered, but there is no official response from Prime Minister Chung or the Democratic Party to Hong’s writing.

In order to implement the loss compensation system for self-employed people, the government needs to issue large-scale government bonds. Accordingly, interest rates in the government bond market soared at once as concerns over supply and demand emerged. There are also concerns that if the market interest rate rises, the effect of the Bank of Korea’s lowering the benchmark interest rate to 0.5% to respond to the novel coronavirus infection (Corona 19) situation may decrease. The construction effect (the government boosts market interest rates by increasing government bond issuance and reduces private consumption and investment activities).

In the course of COVID-19 quarantine measures, the claim that support is essential as the state forcibly restricts operations, and claims that it is excessive support that does not take into account the scale of debt debt are confronted, and social conflict is likely to increase.

“Don’t resist self-employment loss compensation” Hong Nam-ki “Financial is not Hwasoobun”

On the 21st, Prime Minister Chung publicly demanded a legal and institutional improvement plan for the self-employment loss compensation system. He said at the Corona 19 Central Disaster and Safety Countermeasure Headquarters meeting held at the Seoul Government Complex, “appropriate support is needed for those who failed to do business properly because of the government’s quarantine standards. Now, it is time to consider how to institutionalize this.” I ordered. The Ministry of Information and Communications was initially negative about the loss compensation system, saying, “It is difficult to find legalized overseas cases,” but Prime Minister Chung was infuriated and publicly criticized after receiving a report from the Ministry of Information and Transportation.

Hong Nam-ki, deputy prime minister of the economy and the Minister of Strategy and Finance, once again rebelled against the legalization of the loss compensation system. In the morning of the 22nd, he said, “We will review in the direction of providing assistance as much as possible” regarding the promotion of the systemization of the loss compensation system for passport restrictions on his social network service (SNS). We will inform you about the parts that are there as they are, and we will make efforts to coordinate them.”

As the head, he repeatedly mentioned conditions such as the burden on the current state debt. He said, “The fiscal conditions are deteriorating, such as the rapid increase in national debt while overcoming the Corona 19 crisis,” he said. “Because the fiscal situation is not the number of minutes, it is important to remember that the fiscal situation and financial conditions are also one of the important policy variables to be considered. Insisted.

24.7 Articles per Month Initiation of Loss Compensation Act… Funding is the purchase of government bonds from the Bank of Korea

Despite the refutation of the Ministry of Information, the ruling party came up with a proposal that would cost 24 trillion won in one month, one day after Prime Minister Chung ordered a direct review. Democratic Party lawmaker Min Byeong-deok proposed the’Special Act on Compensation for Loss and Win-Win Growth for Overcoming Coronavirus Infectious Diseases’. The main point is to guarantee up to 70% of the loss of self-employed persons who have been banned from gathering due to strengthening the prevention of infectious diseases such as Corona 19. In the case of business restricted businesses, it is possible to compensate for the amount within the range of 60% and 50% for other general businesses.

According to Min’s estimate, in this case, it costs 24.700 trillion won per month. Congressman Min proposed a proposal to issue government bonds to raise financial resources, and to purchase the issued government bonds by the Bank of Korea. Rep. Min said that in the special law, more than 50 members of the party expressed their intention to join the joint initiative.

As the self-employed loss compensation system, which requires a huge government budget, hits a sharp turn, government bond yields fluctuated. According to the Financial Investment Association the day before, the 10-year Treasury bond rate was 1.758% per year, up 0.052 percentage points from the previous day. It is the highest after January 20, 2020 (1.762% per year). The 20-year Treasury bond rate also rose 0.034 percentage points to close at 1.867% a year, the highest since May 22, 2019 (1.872% a year). The 3-year Treasury bond rate also rose by 0.022 percentage points to 0.993% per year. It is the highest since the 17th of last month (0.999% per year).

This is the result of growing concerns over the fiscal deficit. This is because analysis has shown that large-scale issuance of government bonds is essential for the government to finance self-employed people, and that as the government bonds are released in the market, the price of government bonds will inevitably fall (increased government bond rates). If the treasury bond rate jumps like this, the effect of the BOK’s lowering the standard rate in response to the Corona 19 crisis will inevitably disappear. If the market interest rate soars, the burden on households and self-employed people who need livelihood loans increases.

Reporter Eun-Byeol Kim [email protected]