Time needed for ‘fog’ in euro zone to clear: Shin

Shin Je-yoon, the first vice finance minister, said that despite the positives to be taken from Sunday’s Greek election, more time is needed before any improvements will be seen in global financial markets.

“It still feels like we’re standing in the middle of fog,” Shin said in a keynote speech at an economics seminar yesterday. “Until the situation in Europe stabilizes, the global financial market will continue to be uncertain and unstable.”

The Kospi, which rose by more than 30 points on Monday on news of the conservative New Democracy party rising to power in Athens, was almost unchanged yesterday, gaining just 0.06 points from the previous day.

Market watchers expect the market upswing resulting from the reduced risk of a so-called “Greexit” will be short-lived, as uncertainty related to Spain’s ailing financial health gains momentum.

“Spain’s 10-year government bond yields hit a new high of 7.14 percent … on Monday, only the second time they have exceeded 7 percent, and this has added to the sense of uncertainty,” said Jeon Ji-won, an analyst at Kiwoom Securities. The Spanish bonds rose to 7.22 percent yesterday.

Shortly after New Democracy’s victory was confirmed on Monday, foreign investors led a sudden selling spree of Spain’s Treasury bonds in the morning, causing the?yield?to surge.

As Portugal and Greece both sought bailouts after crossing into similar territory, the threat of defaulting is looking increasingly likely.

Shin said local financial authorities have learned they need to shift their focus to keeping track of the total amount of debts held by corporations, households and the government. Previously, the three categories were separately managed.

Seoul has been overly focused on household debts at the expense of public sector lending, according to an official at the finance ministry.

He said there is a need to enhance management of the money supply given that increases in this have caused debts to soar.

By Song Su-hyun[ssh@jooongang.co.kr]