Korean bank protesters defy police

The protesters' headbands read "Unite and Fight"

Thousands of South Korean bank staff continued their sit-in protests on Monday, despite threats by the police to halt their demonstrations against a proposed merger.

The 15,000 employees, who believe the merger will lead to job losses, began their sit-in on Friday, at a training institute in a northern suburb of the capital, Seoul.

They have set up tents and other makeshift dwellings in the compound.

We will not stand down until the merger plan is completely abandoned

Nam Sung-Sam, union leader

Several thousand police are now surrounding the institute, and protesters have reinforced their defence lines and armed themselves with clubs and stones.

They shouted anti-government slogans as police helicopters with loudspeakers hovered overhead, urging them to end their action.

The protest began on Friday with the closure of some bank branches after the Kookmin and Housing and Commercial banks announced the government-backed merger proposal.

Cash machines

Action escalated on Saturday when some non-union managers joined the protest, forcing the closure of more than 1,000 branches.

The Financial Supervisory Service (FSS) - South Korea's financial watchdog - said on Sunday it would send its own employees to the bank branches affected by the protests, to keep them open or to redirect customers to alternative branches if necessary.

The FSS also said it would do its best to keep cash machines working - though many machines have already run out of cash.

Protesters donned plastic bags to try to keep warm

The two banks' presidents have ordered the protesters to return to work before the branches reopen on Tuesday, warning that those who do not do so face suspension and pay cuts.

Merger

The merger of the two banks will create South Korea's largest retail bank, with assets of more than 157,000 billion won ($133bn).

The South Korean authorities have vowed to come down hard on banking and telecoms workers who are striking to protest at the country's economically harsh restructuring plans.

Last week, thousands of workers at South Korea's largest telephone operator, Korea Telecom, went on strike in protest at planned job cuts.

The telecommunications union called the industrial action after the management rejected its demand to delay a privatisation plan which would cause significant layoffs.

Bank restructuring

The government has pushed for mergers among banks in an attempt to restructure the debt-ridden financial sector.

The strike brought Kookmin Bank branches to a standstill

Its shock treatment consisted of declaring six banks insolvent and ordering them to write off their capital.

This was followed by a capital injection of 7,100 billion won ($5.8bn) and an effort to push through mergers, or to group debt-stricken banks into financial holding firms.

Minority shareholders, who had previously been given government guarantees that this would not happen, reacted with outrage.

An embarrassed finance minister, Jin Nyum, appeared on national television to apologise for the government's decision to renege on its promise, saying it had to be done to avoid a meltdown of South Korean banking.

Economic difficulties

The South Korean economy can hardly stay afloat without external assistance.

The investment bank Goldman Sachs recently downgraded the country's economic growth forecast from 5.5% to 4% for 2001.

World prices for South Korea's main exports, semi-conductors, are depressed.

And high oil prices have pushed up the country's imports bill.

The weak economic performance in South Korea is causing widespread concern across the region because international observers see it as a barometer of Asia's economic performance.