Democracy Tested: Parliament Overturns Martial Law as Calls for Yoon’s Resignation Grow

By Jessica Huang

Cover Image Attribute: South Korean soldiers try to enter the National Assembly building in Seoul on Tuesday (December 3, 2024). /Source: Jung Yeon-je / AFP - Getty Image

The sudden and unexpected move by President Yoon Suk Yeol, triggering South Korea's most significant political crisis in decades by declaring martial law late Tuesday night, has left many in shock. The reversal of his decision six hours later, following widespread protests and a parliamentary veto, has only added to the intrigue. 

On Wednesday morning, the unexpected nature of Yoon's actions caught many off guard, including the United States. Members of South Korea's largest labor unions joined the demand for Yoon's resignation, protesting in central Seoul and threatening to strike until he steps down. Despite the surprise, the Biden administration reaffirmed the strong U.S.-South Korea alliance, with nearly 30,000 U.S. troops stationed there.

Under martial law, Yoon attempted to prohibit protests, suspend parliamentary and political party activities, and bring the media under government control. Outraged by his actions, protesters gathered outside Parliament, clashing with South Korean troops who blocked their entry to the National Assembly in one of the nation's most significant political crises in decades.

The swift response of the Parliament to the martial law declaration, with 190 lawmakers voting to reject it, is a testament to the strength of South Korea's democratic system. National Assembly Speaker Woo Won Shik's declaration of the law as 'invalid' and the subsequent lifting of martial law around 4:30 a.m. local time have reassured the public of the resilience of their democracy.

The Democratic Party, which holds the majority in the 300-member Parliament, has posed significant challenges to President Yoon, whose approval ratings have declined in recent months. Since taking office in 2022, Yoon has struggled to advance his agenda against the opposition-controlled legislature.

Tensions have further escalated as Yoon's conservative People Power Party remains at an impasse with the liberal Democratic Party over next year's budget bill. Additionally, Yoon has dismissed calls for independent investigations into scandals involving his wife and senior officials, prompting swift and sharp criticism from political rivals.

If impeached, Yoon would be stripped of his constitutional powers pending a ruling by the Constitutional Court, with Prime Minister Han Duck-soo, the second-highest official in the government, expected to assume his responsibilities.

Han Dong-hoon, the leader of Yoon's party, issued a public apology following the martial law declaration and demanded the defense minister's dismissal. "The president must directly and thoroughly explain this tragic situation," he stated. Yoon has yet to comment on the opposition's impeachment efforts.

How did markets respond today?

The country's Kospi index dropped 1.8%, and the Kosdaq fell 2.4% as calls for President Yoon's resignation intensified from both protesters and opposition parties.

According to Reuters, opposition lawmakers are preparing to introduce a bill to impeach Yoon on Wednesday, which would require a vote within 72 hours of its submission. Meanwhile, Yoon's chief of staff and senior secretaries have reportedly offered to resign collectively.

Following an emergency board meeting, the Bank of Korea announced measures to enhance short-term liquidity and stabilize the foreign exchange market in response to growing concerns over financial instability. The bank also stated it would provide special loans to inject funds into the market if required.

Yonhap News Agency reported that the country's top financial regulator is prepared to deploy a 10 trillion won ($7.07 billion) stock market stabilization fund to ease market volatility. Additionally, South Korea's foreign exchange authorities were reportedly selling U.S. dollars on the onshore market early Wednesday to curb declines in the Korean won, according to two dealers cited by Reuters.

Asia-Pacific markets were broadly lower as investors reacted to developments in South Korea and assessed economic data from the region. Japan's Nikkei 225 and Topix both declined 0.4%, while Mainland China's CSI 300 slipped 0.2%. Hong Kong's Hang Seng index was up slightly by 0.1%. In Australia, GDP data revealed slower-than-expected growth in the third quarter, weighed down by high borrowing costs and persistent inflation, leading the S&P/ASX 200 to close 0.38% lower at 8,462.6.

In the U.S., South Korean stocks experienced sharp volatility overnight amid the political turmoil affecting the world's 13th-largest economy. The iShares MSCI South Korea ETF (EWY), which tracks major South Korean companies, plunged as much as 7% to hit a 52-week low before recovering some losses and closing down 1.6%. The partial rebound followed President Yoon's announcement to lift the emergency declaration after Parliament overturned his martial law decree. Meanwhile, U.S. markets showed mixed results, with the S&P 500 edging up 0.05% and the Nasdaq Composite gaining 0.4%, both closing at record highs. The Dow Jones Industrial Average lagged, dipping 0.2%.

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