Crisis ‘serious,’ could imperil Canadian economy: Carney

OTTAWA — Bank of Canada governor Mark Carney is warning G20 countries to come to terms with the full implications of the Greek crisis and debt overhangs in other countries, or risk a setback to the global economic recovery.

OTTAWA — Bank of Canada governor Mark Carney is warning G20 countries to come to terms with the full implications of the Greek crisis and debt overhangs in other countries, or risk a setback to the global economic recovery.

Canada’s top central banker told a Senate committee Thursday that he does not believe the problems emerging in Greece and other southern European countries will lead to a second recession, but they can hamper the recovery.

If markets respond to Greece’s appetite for debt by making borrowing more expensive overall, Carney says there will be an impact on Canada’s growth.

“The situation is serious,” he said, adding that if appropriate steps are not taken “one can expect an increase in longer term interest rates on a global level.”

“Canada’s fiscal position is among the best, (so) we will do better than others, but we will be pulled up by the rise in global interest rates, and that will have a knock-on effect on investment and growth in this country.”

In Gatineau, Que., Prime Minister Stephen Harper also highlighted the Greek situation at a gathering of representatives of G20 business groups, saying that country’s debt crisis serves as an object lesson to other governments.

“The Greek crisis reminds us that government borrowing and government debts cannot go on without limit,” Harper said.

Canada plays host this summer to both the G8 and G20 summits, a gathering of leaders from the world’s biggest economies.

Carney, recently ranked No. 21 on a list of most influential world leaders by Time magazine, told the Senate committee that he has been in contact with European officials and is encouraged.

Carney said he believes the European community and the International Monetary Fund will find a solution to Greece’s fiscal crisis.

European and German officials assured markets Thursday they were working quickly on approving a bailout for Greece as they try to keep the country’s debt crisis from dragging others into a continent-wide financial meltdown.

European Union monetary affairs commissioner Olli Rehn said he was “confident the talks will be concluded in the next days.”

Rehn said negotiators from the EU, the European Central Bank and the Washington-headquartered International Monetary Fund were “working day and night” on a bailout to “safeguard the financial stability in Europe and globally.”

But Carney said the problem is bigger than Greece, and bigger than the requirement that industrialized countries start ramping down their burgeoning debts, which in some cases are equal to the size of their entire economies.

He said the industrialized nations must make clear to China and other emerging economies that the system cannot function unless they adjust their currencies and play a bigger role in supporting global demand.

The United States, Canada and others have long complained that Asian nations have kept their currencies low to boost exports at the expense of other industrial economies, mostly in North America and Europe.

“What’s required is countervailing policies that are in the interests of other countries to expand domestic demand, particularly in emerging markets, to enhance flexibility in exchange rates and obviously keep the global financial system and trading system open,” Carney said.

Carney also stressed the importance to the recovery of the G20 adopting measures to reform the international banking system, which is regarded as a key contributor to the 2008-09 recession.

While Canada’s banks held up well under the stress, Carney said new rules that will require financial institutions to hold more capital reserves to discourage risk-taking will likely also impact Canada’s banks.

“There are some merits to thinking about further strengthening of the capital regime in this country as well,” Carney said.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Interior Health nurses administer Pfizer-BioNTech COVID-19 vaccines to seniors and care aids in Kelowna on Tuesday, March 16. (Phil McLachlan/Kelowna Capital News)
Canada set to receive 1M Pfizer-BioNTech doses, Moderna playing catch-up

OTTAWA — The federal government is expecting Moderna to make good on… Continue reading

Asymptomatic testing will now be available for "priority groups" who are most likely to spread the COVID-19 virus to vulnerable or at-risk populations. File photo by THE CANADIAN PRESS
Alberta identifies 1,183 new COVID-19 cases on Sunday

50.5% of all active cases are variants of concern

Whistle Stop Cafe owner Christopher Scott and his sister Melodie pose for a photo at the Mirror restaurant. (File photo by Advocate staff)
Alberta Health Services delivers ‘closure order’ to Mirror restaurant

Alberta Health Services says it has delivered a closure order to a… Continue reading

Flags bearers hold the Canadian flag high during the Flags of Remembrance ceremony in Sylvan Lake in this October file photo. (Photo by Sean McIntosh/Advocate staff)
New project to pay tribute to Canadians killed in Afghanistan

Flags of Remembrance scheduled for Sept. 11

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a clinic in Toronto on Thursday, January 7, 2021. THE CANADIAN PRESS/Nathan Denette
Alberta vaccine rollout expanding to front-line health-care workers

More than 240,000 eligible health-care workers can begin booking vaccine appointments starting… Continue reading

Security and police block the entrance to GraceLife Church as a fence goes up around it near Edmonton on Wednesday April 7, 2021. The Alberta government has closed down and fenced off a church that has been charged with refusing to follow COVID-19 health rules. Alberta Health Services, in a statement, says GraceLife church will remain closed until it shows it will comply with public-health measures meant to contain the spread of the novel coronavirus. THE CANADIAN PRESS/Jason Franson
Hundreds gather to support Alberta church shut down for ignoring COVID-19 orders

SPRUCE GROVE, Alta. — Hundreds of people are gathered outside an Alberta… Continue reading

Members of the Canadian Armed Forces march during the Calgary Stampede parade in Calgary, Friday, July 8, 2016. The Canadian Armed Forces is developing contingency plans to keep COVID-19 from affecting its ability to defend the country and continue its missions overseas amid concerns potential adversaries could try to take advantage of the crisis. THE CANADIAN PRESS/Jeff McIntosh
Canadian special forces supported major Iraqi military assault on ISIL last month

OTTAWA — Some Canadian soldiers supported a major military offensive last month… Continue reading

A woman pays her repects at a roadblock in Portapique, N.S. on Wednesday, April 22, 2020. The joint public inquiry in response to the April mass shooting in Nova Scotia has announced a mandate that includes a probe of the RCMP response as well as the role of gender-based violence in the tragedy. THE CANADIAN PRESS/Andrew Vaughan
Creating permanent memorial to Nova Scotia mass shooting victims a delicate task

PORTAPIQUE, N.S. — Creating a memorial for those killed in Nova Scotia’s… Continue reading

Conservative leader Erin O'Toole holds a press conference on Parliament Hill in Ottawa on Tuesday, April 6, 2020. Top Tory leaders of past and present will speak with supporters today about what a conservative economic recovery from COVID-19 could look like. THE CANADIAN PRESS/Sean Kilpatrick
Erin O’Toole says ‘I didn’t hide who I was’ running for Conservative leader

OTTAWA — Erin O’Toole assured Conservative supporters that he never hid who… Continue reading

Calgary Flames' Johnny Gaudreau, second from left, celebrates his goal with teammates, from left to right, Matthew Tkachuk, Noah Hanifin and Rasmus Andersson, of Sweden, during second period NHL hockey action against the Edmonton Oilers, in Calgary, Alta., Saturday, April 10, 2021. THE CANADIAN PRESS/Larry MacDougal
Jacob Markstrom earns shutout as Flames blank Oilers 5-0 in Battle of Alberta

CALGARY — It took Sean Monahan breaking out of his goal-scoring slump… Continue reading

B.C. Premier John Horgan responds to questions during a postelection news conference in Vancouver, on Sunday, October 25, 2020. British Columbia's opposition Liberals and Greens acknowledge the COVID-19 pandemic has presented huge challenges for Horgan's government, but they say Monday's throne speech must outline a coherent plan for the province's economic, health, social and environmental future. THE CANADIAN PRESS/Darryl Dyck
Horgan’s NDP to bring in throne speech in B.C., Opposition wants coherent plan

VICTORIA — British Columbia’s opposition parties acknowledge the COVID-19 pandemic has presented… Continue reading

A grizzly bear walks on a treadmill as Dr. Charles Robbins, right, offers treats as rewards at Washington State University's Bear Research, Education, and Conservation Center in this undated handout photo. Grizzly bears seem to favour gently sloping or flat trails like those commonly used by people, which can affect land management practices in wild areas, says an expert who has written a paper on their travel patterns. THE CANADIAN PRESS/HO, Anthony Carnahan *MANDATORY CREDIT*
Grizzly bears prefer walking on gentle slopes at a leisurely pace like humans: study

VANCOUVER — Grizzly bears seem to favour gently sloping or flat trails… Continue reading

FILE - In this July 27, 2020, file photo, nurse Kathe Olmstead prepares a shot that is part of a possible COVID-19 vaccine, developed by the National Institutes of Health and Moderna Inc., in Binghamton, N.Y. Moderna said Monday, Nov. 16, 2020, its COVID-19 shot provides strong protection against the coronavirus that's surging in the U.S. and around the world. (AP Photo/Hans Pennink, File)
The COVID-19 wasteland: searching for clues to the pandemic in the sewers

OTTAWA — When Ottawa Public Health officials are trying to decide whether… Continue reading

Most Read