Canadian minister calls for action to avoid 'full-blown global crisis'

UNITED AND decisive leadership from Europe and the G20 countries was needed to meet the global economic challenges, the Canadian finance minister said yesterday.

Addressing the Ireland Canada Business Association in Dublin, Jim Flaherty urged “restraint” in order to avoid another global economic downturn. “Politicians must explain to voters that debt and deficits are the problem and that restraint is necessary to avoid another serious global recession.”

Mr Flaherty said yesterday further private sector involvement in the Greek debt crisis was inevitable, while he also called for action on recapitalising Europe’s banks. “Too much time has been wasted. Too many opportunities have been missed. Unless decisive action is taken urgently, our nations will once again be forced to respond to a full-blown global crisis.”

He had words of support for Ireland yesterday, telling his lunchtime audience that Ireland’s “decisive and effective” initiatives should inspire other countries.

It should come as no surprise that Canada is keen to applaud Ireland for taking stringent budgetary actions. Canada’s policy of fiscal discipline and strict banking supervision was a reason why it was one of the world’s strongest performers during the recession.

Of more concern is Mr Flaherty’s forthright criticism of Europe’s reaction to the euro zone crisis. His obvious frustration with the stilted response of the European authorities illustrates the seriousness of a situation which threatens to engulf the global economy.

Despite its success in staving off the worst of the global recession, Canada has seen its economic situation deteriorate in recent months.

While still retaining its triple A rating, Canada’s economy shrunk in the second quarter of this year for the first time since 2009, while the IMF has cut growth targets.

The slowdown is due primarily to economic developments outside its borders, particularly the US, its main trading partner. But the impact of falling exports and declining global demand on the GDP of a country like Canada illustrates the interdependency of the global economy.

Speaking to The Irish Timesyesterday, Mr Flaherty said his government was committed to continuing its policy of debt reduction though he indicated it could move towards more economic stimulus if needed.