Quebec's Debt Mess

Quebec Finance Minister Jean Campeau, acknowledging that his province's spiraling debts are "a veritable cancer," recently unveiled plans for sharp spending cuts and higher taxes. To some critics, that serves as an indication that Prime Minister Jacques Parizeau can no longer afford--politically or economically--to push secession from Canada.

J. Anthony Boeckh, chairman of Montreal-based BCA Research Group, notes that Quebec's $80 billion foreign debt and deficit--equal to 11.6% of the gross domestic product--rank the province alongside many developing economies and "nearly bankrupt" industrial countries. Boeckh warns that in order to persuade global investors to support independence, Parizeau would have to get Quebeckers to agree to "the unthinkable"--a drastic drop in living standards similar to the one Mexico has been experiencing since the peso crisis. Otherwise, Quebec might face massive capital flight and a "catastrophic" currency devaluation.

Before it's here, it's on the Bloomberg Terminal.