Editorial: Korean rescue is only a start
If Korea succeeds, and raises substantial amounts of new money from the capital markets, it will be a remarkable turnaround in the few weeks since Christmas, when a debt moratorium was just days away. "Korea's problem was atypical in the first place and Korea is proving atypical in its turnaround," says Stern. "This is an OECD country, an industrial country, with a long record of growth and export capacity which ran into a liquidity problem. For sure, that was the result of poor financial management. But everybody saw this as a temporary problem; everybody was convinced of Korea's ability to restructure and recover."
Unfortunately, the speedy and relatively smooth process of stabilizing Korea's short-term financial problems provides no template for other economies in Asia. Indonesia is a more troubling case showing signs of both long-term and short-term debt problems at both the public and private sector level. And it has the added complexity of a less stable political scene. Still, the fact that Korea pulled back from the brink shows that it can be done, and importantly stabilizes one of Asia's three biggest economies.