aware that there are critics overseas who rate korea ’ s structural reform as far from satisfactory. however, as the experience of other countries attests, it is difficult to achieve satisfactory outcomes in a short time because restructuring by definition entails conflict and pain. considering these points, i venture to ask for your continued warm interest and support for korea ’ s restructuring efforts. i hope the korean economy will become more advanced thanks to its restructuring and also wish that its practical cooperative relationship with the eu may continue to deepen in the future.

” of the economy for as long as the economy does not pull itself out of recession, gradually turning into a time - bomb for the economy as a whole. for example, if the korean economy had not recovered this year, the restructuring of the daewoo group ( a large chaebol some of whose interlinked companies have been placed under a workout program ) and the problems involving investment trust companies - two major issues which have come to the fore since july - might have remained under the surface with the potential to cause even greater trouble in the future. this all leads to the conclusion that economic recovery is vital for the smooth implementation of restructuring measures. having said this, we must bear in mind that if the economy recovers too quickly and exuberantly, causing overheating, economic units may not feel the need to restructure themselves. too low interest rates choke off companies ’ incentives to reduce their debt. with the improved cash flow, companies are lured into expanding their business. also, financial institutions become less interested in clearing bad debt from their books since the opportunity cost of holding it decreases with lower interest rates. another problem can spring up in the choice of monetary policy stance when inflationary pressures begin to rise due to an over - accommodating policy. in most cases, the period of restructuring corresponds to a deflationary phase so that the central bank can ease monetary policy without worrying about inflation. however, if inflation raises its head before the restructuring has proceeded very far, the central bank may be in a position where it has to choose between price stabilization and maintaining an environment favorable to the restructuring process. this is a dilemma for the central bank because either choice will have negative effects. if the central bank, for example, adopts a monetary - tightening stance to fight inflation, then the short - term profitability of companies and financial institutions will deteriorate, which may blunt the momentum for restructuring. on the other hand, if a relaxed monetary policy stance is maintained to keep restructuring on the road, prices rise and companies may once again turn to their debt - dependent, expansionary management style, which ran riot in the past. as a result, people will come to lose faith in restructuring itself. for successful restructuring, therefore, the economy must not be allowed to overheat nor should the recovery be less than adequate. achieving a well - balanced, unbiased economic environment for sustainable growth creates the best condition for reform measures. in other words, the central bank