G20 leaders to tackle European debt crisis in Toronto, Flaherty says

OTTAWA, Ont. — Finance Minister Jim Flaherty is encouraged by the response to the European crisis so far and believes more action will be taken at the G20 summit next week.

OTTAWA, Ont. — Finance Minister Jim Flaherty is encouraged by the response to the European crisis so far and believes more action will be taken at the G20 summit next week.

The finance minister appeared at a Senate committee hearing Thursday defending his budget bill, saying Canada is the envy of the world in terms of its economic health.

Flaherty told the senators that although Canada’s economy has bounced back strongly from recession, with a 6.2 per cent growth rate in the first quarter, the country still needs the $19 billion in stimulus spending proposed in the budget.

“We are still in a fragile time,” he said.

In an interview with The Canadian Press, the minister said he was more encouraged now than a few weeks ago about the outlook for the global economy following aggressive action by European countries and International Monetary Fund in dealing with the Greek debt crisis.

“And we expect more will be done in Toronto at the G20 next week,” he said, though he did not outline what specific measures the world’s leading economies could take on the issue.

On Wednesday, Bank of Canada governor Mark Carney said the risk to the global outlook had intensified and the leaders should take bold steps to address the problems.

Flaherty had met earlier with foreign correspondents in advance of the G20 and was quoted by The Associated Press as saying the leaders hope to announce an agreement on deficit reduction targets next week.

Most of the world pumped up spending during the 2008-2009 recession and now are facing weak economies and growing deficits. The IMF projects that debt among advanced economies will rise from 80 per cent of gross domestic product in 2008 to 110 per cent by 2015.

By comparison, Canada’s debt to GDP ratio during its fiscal crisis in the mid-1990s never reached 70 per cent.

Several senators asked Flaherty to split the bill to allow separate consideration of a provision calling for the restructuring of Atomic Energy of Canada Ltd. to make the troubled Crown corporation a more enticing target for prospective buyers.

Flaherty refused, saying AECL is a budget matter.

“AECL is a major drain on the treasury, and not just once a year, they come back every year with another tale of woe, a tale of disaster looking for hundreds of millions of dollars,” he said. “It’s time we deal with AECL as a budget priority.”

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