`Within A Year, Quebec Will Be A Country'

Ever since it was founded in 1968, the Parti Quebecois (PQ) has fought for more autonomy for the French-speaking province of Quebec. But never before have the PQ's leaders been so confident of their ultimate goal of independence. "In two months, we will have a new government" in Quebec, PQ President Jacques Parizeau told a rally of 1,000 cheering party workers on July 23, the night before Premier Daniel Johnson called elections for Sept. 12. "And within a year," Parizeau shouted, "Quebec will be a country."

It's not the first time Quebeckers have promised to quit the Canadian federation. In fact, many English-speaking Canadians have lost count of all the times. But underestimating Quebec's nationalism could be dangerous for Canadians who want their country united. It's also risky for Americans, since an independent Quebec would have to negotiate admission to the North American Free Trade Agreement.

DIM VIEW. The PQ is on course to win a decisive victory against Johnson's Liberal Party in the September vote. Such a victory could trigger a final battle over Canadian unity because PQ leaders vow to hold a referendum on independence within a year of taking power. No wonder Johnson, 49, calls this "the most important election in my lifetime."

The reverberations already are being felt. For one thing, international markets are "taking a dim view of Canada," warns John McCallum, chief economist at Royal Bank of Canada. The Quebec question, combined with Canada's huge debt burden, has clobbered the Canadian dollar, which is now worth around 72 cents U.S. Desperate to find international buyers for its bonds, Canada has imposed interest rates that, adjusted for inflation, are the highest of any major industrial country. Canadian three-month treasury bills are paying around 6%, compared with 4.4% for U.S. T-bills.

Economists worry that the financial tremors could worsen. "The markets will react very negatively if the PQ wins a large majority," predicts Brian I. Neysmith, president of the Canadian Bond Rating Service. "International investors will decide that Canada is not the safe haven it used to be," adds Robert Fairholm, chief forecaster for DRI Canada. He fears the dollar could fall to an all-time low of 67 cents. Another fear is that growth could slow, driving unemployment above the current 10.3% level.

The Liberals are hoping they can make a strong case that Quebec cannot afford another battle over sovereignty. And they point out that a majority of Quebeckers opposes independence, according to most polls. Quebeckers are well aware, however, that even if they elect the PQ now, they'll have a chance to vote on independence next year. "The Liberals spent the last nine years trying" but failing to win increased autonomy for Quebec, charges Bernard Landry, PQ vice-president. "Now, all they advocate is the status quo." In contrast, the PQ advocates political and economic independence, with just a few exceptions: They would keep the Canadian dollar and allow citizens to hold Canadian as well as Quebecois passports.

Parizeau, who is 63 and holds a doctorate from the London School of Economics, has made it clear that he would view a victory as a mandate to work for independence. "Once you start this process, it's like pulling a log out of a stack mf wood," worries Guy Saint-Pierre, CEO of SNC-Lavalin Group Inc., Canada's largest engineering firm. "Once you pull one log, no one is in control of events." The safe haven that is Canada is in for some serious roiling.

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