[EDITORIALS]Step softly on household debt

Too much worry can get in the way.

Alarms are sounded over the recent jump in household debt. But there is just as much a danger in responding ad hoc to these worries and putting out ad-hoc measures.

Korea's household debt as a percentage of gross domestic product was 75 percent through September, lower than the 80.2 percent of the United States or the 82.7 percent of Japan (June figures). In addition, loans to self-employed businessmen are recorded as household debt. Thus Korea's pure, noncommercial household debt is smaller than that of the United States or Japan.

This does not mean that there is nothing to worry about. Household debt is a relatively new phenomenon. The quick and rapid jump in household debt comes against the background of the government's expansionary fiscal policies and economic stimulus measures, while corporations went directly to the markets to raise capital, rather than borrow from banks as before. As a result, financial institutions had to look for new customers. If policymakers had shifted policy direction early this year, lowering the interest rate and gradually tightening government purse strings, the Korean economy would have staved off bubbles and improved the outlook for the coming fiscal year. But the timing was off. It would be a bigger mistake now to arbitrarily interfere with lending to households or raise interest rates; such measures would only stagnate the economy.

The government has implemented strong measures, such as mandating that banks reduce the portion of household lending and set aside greater loss provisions against household loans. A more fundamental remedy is to wait for the debt load to gradually subside. What's more, we should caution against a sweeping sense of financial irresponsibility. The government, financial institutions and media should work together to fight off the misconception that the recently adopted individual workout and debt-recovery programs are to cancel debts; they are to help individuals better manage their finances.