South Korea is beefing up market monitoring over concerns that Greece may default on its debt, and is ready to take appropriate measures to reduce fallout, a senior government official said Monday.
  

At the macroeconomic and financial policy meeting, Vice Finance Minister Joo Hyung-hwan said the government has various contingency plans to cope with any trouble that may arise if a settlement is not reached between Athens and its international creditors. He said the government has been following Greek developments on a real-time basis since last week and even set up a joint inspection team made up of officials from the finance ministry, the Bank of Korea, the Financial Services Commission and the Financial Supervisory Service.
  

This team is examining the local market and financial sector's exposure to external shocks.
  

"Market stabilization measures will be taken swiftly in line with preset contingency plans," Joo said, adding that judging by the current direction of negotiations and a fast approaching deadline, a Greek default cannot be entirely ruled out.  
  

"If the country defaults, it could lead to more volatility that can pose some challenges for South Korea's financial market," he said. The official pointed out that a crisis situation will cause some investors to pull out from emerging markets and seek "safer" countries to park their money in. He said European funds, in particular, may take such steps.
  

But the official said even if there is a default, its impact on the South Korean economy will be limited for the most part.
  

"South Korea has little trade with Greece and enjoys sound financial health," the vice minister pointed out. The Mediterranean country only accounted for 0.2 percent of South Korea's exports as of late last year.
  

The ongoing economic instability in Greece still seems to be taking a toll on South Korea's exports.
  

Latest data by the Korea International Trade Association showed that South Korea's exports to Greece had plunged 73.1 percent during the January-May period from a year earlier to $165 million.
  

The drop is attributed to less demand for ships, a major export item South Korea sells to the European country.
  

Its imports from Greece also fell 41.1 percent over the same period to $118 million, the data showed.
  

He added that many economists have said that even in the worst-case scenario, the repercussions will not be as severe or long-drawn-out as the previous financial troubles that rocked countries like Italy, Ireland, Spain, Portugal and Greece in the late 2000s.
  

Greece has called for a national referendum on July 5 on how best to go about its debt repayment plan, making it likely that the country will not be able to meet its repayment obligations to the International Monetary Fund set for Tuesday.
  

The European Central Bank may continue to provide emergency liquidity until the referendum is held that can avert immediate problems for the country, according to government sources.
  

The sources added that even if Greece defaults or its banks cannot meet their payment obligation, the country will not take steps to leave the eurozone. Greek banks are shut until July 6, with depositors only allowed to withdraw small sums of money from automated teller machines.
  

They said the likelihood of Greece's problem spreading to other European neighbors is not great.
  

At the meeting, Joo pledged to upgrade the country's early warnings system so policymakers will have sufficient time to cope with any problems that may arise in the second half.
  

Such a system can, moreover, allow local market actors to detect growth opportunities.
  

Separately, the BOK said in a statement that it has held a meeting to monitor and analyze the impact of the Greek situation on the Korean financial and foreign exchange markets.
  

The central bank said it will continue to monitor the markets as there are possibilities the Greek woes may heighten volatility on the local financial market, adding that it will cooperate with the government to swiftly roll out measures, if necessary. (Yonhap)