Economy vulnerable, but Taiwan premier cautiously optimistic

Taipei (The China Post/ANN) - The China Post --Taiwan Premier Sean Chen expressed cautious optimism yesterday concerning Taiwan's future economic situation in relation to the eurozone crisis. He said that domestic financial institutions had limited direct exposure to euro-dominated debt of around NT$23.3 billion (US$780 million), accounting for only 0.07 per cent of local banks' total assets.

The premier stated that the nation's small and open economy is especially vulnerable to external uncertainties like Europe's sovereign debt crisis, therefore the Cabinet will stay observant of the broader economic situation in Europe.

In response to the Sunday election victory of mainstream pro-austerity parties New Democracy and PASOK in Greece, Chen held a meeting yesterday along with the Ministry of Economic Affairs, the Central Bank of the Republic of China, the Council for Economic Planning and Development (CEPD) and the Financial Supervisory Commission (FSC) to discuss economic strategies for Taiwan's future.

Chen pointed out that although Greece has decided to stay in the eurozone, the leader of the winning New Democracy party - Antonis Samaras - still faces challenges to form a ruling coalition, which could have an impact on Taiwan. Along with the Greek financial crisis, local authorities will also need to be on the lookout for Spain and Italy's faltering economy, the G-20 meetings and financial ministry meetings of the European Union, Chen said. Chen gave his word that the Cabinet will keep a close watch on every movement in Europe.

The FSC has mapped out plans to face the challenges of the eurozone crisis through stabilising the stock market, providing capital for some private firms and also firming up domestic institutions' ability to cope with risk, Chen said. In other efforts, Chen also asked the central bank to implement currency policies and maintain order in the foreign exchange to keep the New Taiwan dollar's exchange rate stable.

Premier Chen stressed the importance of the export business in Taiwan, showing anxiety over the imbalanced export rate and export order rate in the recent half year. Attracting Taiwanese business investments back to Taiwan is an important strategy, said Chen. He has asked the CEPD to implement strategies that require labor and land policies to attract Taiwanese investors.

The Ministry of Finance reported in the meeting yesterday that there will not be a tax increase due to the stable financial situation, and also because government has nearly reached its debt ceiling. Channeling private funds to public construction is also an important issue for the government, said Chen.

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