U.S. View on G-7 Growth Seen as Ambiguous by Canada’s Flaherty

U.S. officials pushing for an easing of austerity to aid economic growth are fostering ambiguity just when the Group of Seven should be recommitting to debt reduction plans, Canadian Finance Minister Jim Flaherty said.

Flaherty, in an interview today before a meeting of G-7 finance officials in Aylesbury outside London, said the world’s major economies should find a balance between growth-inducing measures and sound fiscal policies. He singled out the U.S. government as needing to provide more budget clarity.

“Some in the G-7 have, how to put it, ambiguous positions,” said Flaherty, who oversees the only G-7 economy with a stable top credit rating. “The Americans need to be more clear where they stand on this. They seem to be wanting to encourage growth more than fiscal responsibility.”

Flaherty spoke after U.S. Treasury Secretary Jacob J. Lew said European policy makers need to “do a little better” in fostering recoveries in economies enduring austerity measures. After committing at a 2010 Toronto summit to cut budget deficits in half by this year, most advanced nations are now facing failure on that score and on a related pledge to stabilize debt by 2016, leaving Canada increasingly isolated.

“There is a desire to have much more emphasis on incentives on stimulus than on what they call austerity,” Flaherty said, adding that growth and budget discipline aren’t “mutually exclusive goals.”

Budget Pledge

Flaherty has pledged to return Canada’s federal budget back to balance by 2015.

“One can have a budget and a budgetary plan that moves in the medium term a country back to a fiscally responsible position, at the same time stimulates certain parts of the economy,” Flaherty said.

Policy makers in the U.S. and Europe seem to be placing more emphasis on reviving tepid growth.

“We feel very strongly there needs to be the right balance between austerity and growth,” Lew said in an interview on CNBC Television in London today. “Overall, Europe is going to need to do a little bit better. There’s room for progress.”

While Flaherty said Canada is most closely aligned on the issue with Germany, even German officials acknowledge a need to ease budget-cutting.

Governments have earned “enough room to maneuver” to act, German Finance Minister Wolfgang Schaeuble said yesterday.

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