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South Korea rescue hits trouble over guarantees

Wednesday 31 December 1997 00:02 GMT
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The multi-billion dollar plan to bail out South Korea hit an obstacle yesterday after banks in the US, Europe and Japan said any agreement to roll over short-term debts would depend on the central bank guaranteeing repayments. In effect they are asking the Korean government to turn private debt into sovereign debt.

The government made it clear that this was too much for it to swallow. Officials in Seoul say that they have never permitted the transfer of private debt to sovereign status and will not do so now. After two separate meetings in New York, bankers issued statements of support for South Korea in a move aimed at giving a psychological boost to the global bail-out effort.

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