Canadian Prime Minister Justin Trudeau, seeking to rejuvenate his government’s mandate amid an ethics scandal and double-digit unemployment, on Tuesday named a new finance minister, suspended all parliamentary business and promised to return next month with an “ambitious” new spending plan to help drive the recovery.
The Canadian leader prorogued the legislature, a formal act that ends the current parliamentary session, to outline a new agenda, which he plans to introduce on Sept. 23.
It was the culmination of a dramatic few days in Ottawa. Earlier on Tuesday, Trudeau appointed Canadian Deputy Prime Minister Chrystia Freeland as the nation’s new minister of finance after the previous finance chief, Bill Morneau, resigned amid policy differences.
Photo: Reuters
The moves suggest that Trudeau is not in any rush to reverse the kind of spending that has already driven the nation’s budget gap to 16 percent of economic output this year — the highest deficit since World War II.
While the pandemic has been devastating, it also offers up an “unprecedented” opportunity for a long-term recovery plan and to fill “gaps” in public health and social safety nets exposed by the pandemic, Trudeau told reporters.
“This is our moment to change the future for the better,” the prime minister said. “We can’t afford to miss it because this window of opportunity won’t be open for long.”
In Freeland, Trudeau has found an ally on aggressive fiscal policy, but someone with enough political clout to maintain discipline on how the money is spent.
The former journalist has arguably been Trudeau’s most successful minister, assigned to some of the government’s toughest files, such as negotiating a new North American free-trade agreement with US President Donald Trump’s administration.
Freeland keeps her current role as deputy prime minister.
Her appointment was welcomed by economists and business leaders.
She is “a strong choice with seasoned experience on domestic and international policy issues along with a record for forging consensus across different views,” Rebekah Young, an economist at Bank of Nova Scotia, said by e-mail. “Pushing back on further spending requests will be part of the job and she’s been proven to be a tough, but effective negotiator.”
Freeland, 52, is the first woman to hold the position and Trudeau’s second finance minister after Morneau.
She is only the second female finance minister appointed by a G7 country, following former French minister of the economy, finance and industry Christine Lagarde.
The swift change in Canada’s political landscape began with Monday’s resignation of Morneau, amid disputes over what the recovery plan should look like.
Advocates close to Trudeau have been pushing for a transformational social and economic agenda to take advantage of historically low interest rates, and some had seen Morneau as too cautious.
Freeland on Tuesday endorsed the idea of an ambitious government plan.
“This is a once-in-a-lifetime challenge for our whole country and our commitment as a government is to do whatever it takes to support Canadians as we get through that challenge,” she said.
The government wants “to turn this tremendous challenge into a fabulous opportunity for our country,” Freeland added.
Canada is poised to see budget deficits well in excess of C$100 billion (US$76 billion) for at least one more year.
Economists see Canada’s budget gap at about that level next year without new measures. The deficit for this year is projected at C$343 billion — more than six times the previous all-time record.
“The direction he [Trudeau] is taking casts aside how to eventually exit from pandemic policies in the quarters and years ahead in favor of pivoting toward a long-term expansionist strategy,” Derek Holt, head of capital markets economics at Bank of Nova Scotia, said in an e-mail.
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