Canada’s Jim Flaherty, the longest-serving Group of Seven finance minister, urged his counterparts in Europe and the U.S. to restore waning investor confidence in their finances that threatens to undermine the global recovery.
Flaherty, speaking to reporters yesterday in New York, said he’s concerned about the "delay" by European officials in dealing with the Greek debt crisis, while he urged U.S. lawmakers to quickly come up with a plan to reduce deficits in the world’s largest economy.
"It’s a detriment to the international system when we have issues that fester and are allowed to get to the brink before they are resolved," Flaherty, Canada’s finance minister since 2006, told reporters following a speech at the New York Yacht Club. "We have seen that before and I hope that we don’t see it again."
In his New York speech, his fifth to the Canadian Association of New York since 2006, Flaherty touted Canada’s success in largely escaping the global financial crisis, and held up his country as a model for other countries. He cited estimates by the International Monetary Fund that show Canada is one of only two G-7 nations expected to balance their budgets by 2016.
Earlier this month, Flaherty introduced a fiscal plan that seeks to bring Canada’s federal government back into surplus as early as 2014.
"In demonstrating the value of fiscal responsibility, Canada has a lot to offer," Flaherty said. "If anything, our response to the most recent global downturn has made our country even stronger and more competitive."
Flaherty said Canada’s effort to eliminate its deficit frees up resources to lower taxes and will keep the country’s interest rates down. Canada’s improving fiscal outlook has boosted demand for its long-term government bonds relative to other Group of Seven peers, with yields on Canada’s 30-year securities 78 basis points less than similar U.S. bonds.
In his speech, Flaherty said the health of the global economy hinges on the U.S. government’s ability to get its finances in order.
"It’s essential that we all have a clear strategy in place to ensure markets continue to have confidence in our fiscal plans, and there is no time to waste in doing so," Flaherty said. "The health of Canada’s economy, and of the world’s, for that matter, depends greatly on the fiscal decisions being made in this country."
U.S. lawmakers and White House officials met for the 10th time yesterday with a goal of wrapping up discussions by early next month to slash the federal debt and deficit by trillions of dollars, a condition Republicans have set for increasing the nation’s $14.3-trillion debt ceiling in the coming weeks.
