Quebec’s Charest Calls September Vote Amid Protests

Quebec voters will go to the polls Sept. 4 after Premier Jean Charest called an election with more than a year remaining in his mandate, betting he can overcome months of social unrest and win a fourth consecutive term.

Quebec’s legislature was dissolved after Charest met with Lieutenant-Governor Pierre Duchesne in Quebec City today, Charest told reporters in the provincial capital.

The election raises the possibility of a return to power of the separatist Parti Quebecois, whose support in recent polls is close to Charest’s Liberals, a prospect that is making investors wary of the province’s debt. The Parti Quebecois is led by Pauline Marois, a former Quebec finance minister.

“Even though the PQ doesn’t talk a lot about sovereignty, and even through Ms. Marois doesn’t want to commit on a date for a referendum, the PQ remains a sovereigntist party,” said Daniel Salée, a professor of political science at Concordia University in Montreal. “Sovereignty is a fundamental goal of theirs.”

Quebec’s 5 percent bonds due in 2038 yielded 32 basis points more than British Columbia’s 4.7 percent bonds due in 2037, the most since at least August 2010, according to data compiled by Bloomberg. That spread has averaged 12 basis points over the past two years.

Quebec, which is predominantly French-speaking, has twice voted in referendums against seceding from Canada, most recently in 1995. The sovereignty issue has lost momentum in recent years. In the May 2011 federal election, the separatist Bloc Quebecois was reduced to four seats from 49 in 2008.

According to a poll by Leger Marketing published today by Le Journal de Montreal, Quebec sovereignty was ranked 10th among a list of top election issues for voters. Health care topped the list.

Polls Close

The same poll found the Parti Quebecois has the support of 33 percent of voters, with the Liberals backed by 31 percent. The poll, taken July 29 and July 31, has a margin of error of

2.4 percent.

Charest has been in power since April 2003, when he ended nine years of rule by the Parti Quebecois. He had until December 2013 to call a vote.

The 54-year-old leader has been facing months of street protests from students and union groups with a plan to press ahead with an increase in post-secondary tuition fees, an issue that is poised to dominate the election campaign. Charest pushed through in May a law that suspended school and curbed demonstrations.

The protests may end up working in Charest’s favor. Fifty-six percent of respondents in a June poll by Leger Marketing said they backed the tuition increase, while 35 percent say they favor the students’ stance.

Non Voters

“A big chunk of those demonstrators who took to the streets against Charest simply don’t vote. Their participation rate is quite low,” Salee said. “There’s a combination of factors that could help Mr. Charest hang onto power.”

About 155,000 students at Quebec universities and community colleges have been on strike since Feb. 13 over a plan by Quebec to raise university fees by 75 percent, or C$1,625, over five years. The protest movement, which has swollen to include workers, opposition politicians and labor unions, has sparked hundreds of demonstrations in Montreal and more than 1,600 arrests.

Charest must also defend himself against charges of lax governance. The Liberal government has been hurt in the last two years by media reports that organized crime infiltrated the construction industry to win government contracts. A commission looking into the public contracting process opened in May and is set to resume Sept. 17 after a summer recess.

Tuition Increase

Finance Minister Raymond Bachand is counting on the tuition increase to help Quebec, which has the highest debt as a percentage of gross domestic product in Canada, plug a C$1.5 billion ($1.5 billion) budget gap by 2013-14. Quebec expects the additional fees to bring in as much as C$332 million a year by 2016-17.

Government debt in Quebec amounted to about 62 percent of 2011-12 gross domestic product, the highest among Canada’s 10 provinces, according to a June report published by the Toronto-based credit rating company DBRS Ltd. Quebec’s debt is rated A+ by Standard & Poor’s, Aa2 by Moody’s and A (high) by DBRS. S&P affirmed its rating on July 11, saying the province has “demonstrated its commitment to reducing debt.”

Quebec’s election also comes amid signs that the provincial economy is faltering. Output was little changed in April as agriculture, forestry and mining declined, according to a July 19 report by the Institut de la statistique du Quebec, the provincial statistics agency. Canadian growth accelerated to 0.3 percent in April, Statistics Canada said June 29.

Jobless Rate

Unemployment in the province exceeds the national average. Quebec’s jobless rate was 7.7 percent in June, Statistics Canada said July 6, compared with 7.2 percent for the whole country. The province also has the country’s highest personal tax rates, according to data compiled by the federal revenue department.

Bachand said yesterday’s he’s opposed to a proposed takeover of home improvement retailer Rona Inc. by U.S. competitor Lowe’s Cos, saying the Quebec company’s supply chain is a “strategic asset” for the province.

Charest plans to encourage economic development in its sparsely populated north to boost revenue from natural resources such as natural gas, minerals and wind power while helping to raise living conditions. Environmental activists and opposition politicians have criticized Charest for the so called Plan Nord, arguing the government isn’t doing enough to protect the environment or charging companies enough in royalties.

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