Discord between DP, finance ministry erupts over emergency handout direction

SEOUL, Feb. 3 (Yonhap) -- A policy clash between the ruling Democratic Party (DP) and the finance ministry over the direction of the country's fourth round of emergency coronavirus handouts has broken out, portending a tumultuous deliberation process until the final issuance.

Rep. Lee Nak-yon, head of the DP, said in a parliamentary speech Tuesday that the party will officially seek to pass an extra budget to provide a fourth round of pandemic relief funds.

Lee stated that the party plans to consult with the government on a two-pronged approach of providing selective and targeted support to those experiencing relatively more severe economic difficulties and also of issuing universal stimulus checks to everyone.

Following Lee's speech, Finance Minister Hong Nam-ki, however, publicly expressed concerns specifically with Lee's idea, suggesting that it would be difficult for state coffers to support both handout programs in the current state.

"But even if additional relief funds are inevitable, it is hard for the government to accept calls to provide support to all people as well as targeted assistance," Hong said.

Hong also stated that the finance ministry could discuss an extra budget in March if needed, whereas the DP is reportedly seeking to begin related discussions this month during the National Assembly's extra parliamentary session.

After Lee and Hong's disagreement on the new handouts went public, the DP chief said in an interview that the party and the government "have to consult with each other moving forward."

Lee also revealed his apparent discomfort with Hong's position, saying that he hopes the government "doesn't put up a curtain or a wall" in negotiating the new round of handouts.

Under a pandemic compensation bill being prepared by a ruling party lawmaker, the country may need at least 98.9 trillion won (US$89.7 billion) if it seeks to compensate part of the business losses of smaller merchants.

The finance ministry is wary of quickly accumulating debt, as the national debt is expected to reach 956 trillion won this year, up 150.8 trillion won from last year.

On Wednesday, Lee, when asked about his thoughts on the new emergency handouts, said that even small merchants at local markets "take loans when facing difficulties."

"The German chancellor announced that her government will take loans and pay them off after two years. We can also solve (the current crisis) through such a mindset," Lee said in a radio interview.

To be clear, a tug-of-war between the ruling party and the government over mediation of state spending is hardly new, with the DP having pushed for increased spending especially in light of the pandemic, whereas the finance ministry has traditionally been conservative, prioritizing fiscal soundness.

But the latest public discord between the DP and the finance ministry is particularly conspicuous, with some observers questioning whether it a sign of broader organizational strife that can be spotted near the end of an administration.

A clash between the DP and the finance ministry was also reported in a closed-door policy meeting on Monday, with DP floor leader Rep. Kim Tae-nyeon and Hong having reportedly engaged in a heated debate over the handouts for nearly an hour.

According to a person familiar with the meeting, Kim, frustrated, stormed out of the meeting after telling Hong to "take follow-up measures."

In the past, the finance minister had found himself in the hot seat in other politically sensitive policy squabbles as well.

Last November, Hong abruptly volunteered to resign following the finance ministry's policy rift with the DP over setting the standard for levying stock transfer taxes. President Moon Jae-in instantly turned down Hong's resignation offer.

The minister's action drew criticism at that time from members of the DP, who accused Hong of breaking ranks with the ruling bloc. Hong again has drawn a similar reaction from the ruling party over his latest public statement.

The clash between the DP and the finance ministry is expected to continue for some time, as the ruling party is expected to announce major fiscal projects, such as the construction of a new airport on the southeastern Gadeok Island, ahead of the April mayoral by-elections in Seoul and Busan.

Some observers say that ultimately Cheong Wa Dae will have to settle the disagreement between the DP and the finance ministry.

President Moon Jae-in has mentioned the need to issue an additional round of emergency handouts, but Cheong Wa Dae has remained quite on the details and direction of the envisioned package.

"A decision that requires a mass budget injection should ultimately be made by the president and the ruling party, not by officials at the finance ministry," a DP member said.

odissy@yna.co.kr
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