Canada’s finance minister pledged on Wednesday to stick to his strict budget deficit reduction plans and urged other major countries to do the same, saying the current market turmoil was caused by excess debt.
“This is a government problem. Governments have to get their fiscal houses in order,” Canadian Finance Minister Jim Flaherty told reporters.
Stock markets are unhappy with the increasing debt loads of the US and some eurozone nations and do not like the seeming lack of political will to tackle the problems.
Flaherty said the G20 major and emerging nations had to stick to a unanimous pledge they made at a G20 summit in Toronto last year to halve their budget deficits by 2013 and eliminate them by 2016.
“This will cause some pain, no question, but it’s absolutely essential that this be done,” he said before a two-day summer policy retreat in Wakefield, Quebec. “The follow-through is that countries that have unacceptable deficit and debt situations will act to correct those situations and certainly seek to have the support of their populations.”
Flaherty said Canada was performing well relative to other countries, saying it had recorded seven consecutive quarters of growth.
However, he added that global economic uncertainty “poses obvious risks for Canada,” given its reliance on trade.
The Conservative government — which was re-elected with a majority in May — says it will stick to its plan to eliminate the budget deficit by 2014-2015, in part by finding ways to save C$4 billion (US$4.04 billion) a year in spending.
“We will stay on track, we will continue with the plan ... In an uncertain global economic situation, one of the strategic contributions that [we] can make to bolster confidence and growth in Canada is to maintain our strong financial and fiscal position,” Flaherty said.
The New Democratic Party (NDP), the largest opposition party in the House of Commons, said Flaherty was being too inflexible and called for more government spending on projects such as public transit systems and sewage plants.
“It would be a show of confidence in our economy for him to be open to some strategic infrastructure spending ... so that when a stronger upturn happens we’re well positioned,” said Peggy Nash, the NDP’s finance spokeswoman.
Finance ministers from the G7 leading industrialized nations pledged on Sunday to work together to help address recent market turmoil, but Flaherty said they did not discuss introducing new stimulus programs.
“The discussion we had was dealing with the deficit and debt situations in the United States and the European Union,” he said.