Canadian Finance Minister Jim Flaherty said he is ready to take new steps to offset any worsening of the global economy, and that European leaders must “act decisively” this week to contain their debt crisis.
“We need to be ready in Canada to protect our country as best we can when difficult things happen to us that emanate from outside of our country,” Flaherty said in a speech in Ottawa today to the Ireland-Canada Chamber of Commerce. “The delay that has accrued over the course of almost two years now by the Europeans has been very costly.”
Canadian employment declined for the second time in a row last month, the government statistics agency said Dec. 2, and the U.S., which buys three-quarters of Canada’s exports, faces “substantial difficulties,” Flaherty said. European leaders meeting this week, including at a Dec. 9 session in Brussels, are key to aiding global growth, Flaherty said, adding he will stay in contact with his peers in the region.
“It’s important in the eurozone for the banks to be recapitalized and for the resources of the eurozone to be used primarily to accomplish the bank recapitalizations, which will help prevent contagion from those countries that are heavily indebted and whose banking systems have been under attack,” Flaherty said.
The Canadian dollar strengthened 0.6 percent to C$1.0140 per U.S. dollar at 12:13 p.m. in Toronto as speculation that leaders will make some progress finding a solution to the region’s debt crisis buoyed riskier assets. One Canadian dollar buys 98.70 U.S. cents.
Flaherty also said the most important contribution government can make to bolster confidence and growth is to maintain a sound fiscal position. He said next year’s fiscal plan won’t have any big new spending measures, though he may reallocate some funds toward priorities.
“There will be no big new spending programs, obviously we will do some reallocation and we have a deficit-reduction plan,” he said. “We do have to be flexible and pragmatic.”
The report last week showing Canada’s economy grew at a 3.5 percent annualized pace in the third quarter “was quite positive,” Flaherty said. “Some of that clearly is attributable to a catch-up because we had a weaker second quarter this year, in part due to natural disasters.”
Output shrank at a 0.5 percent pace in the second quarter in part because of disruptions in the automobile and energy industries.