Finance Minister Jim Flaherty urged European leaders to find a solution to their debt crisis quickly, or risk further harm to the global economy.

"This dire and pressing problem threatens not only Europe itself, but all countries," Flaherty told a business audience at a luncheon for the Canadian Club in Toronto. "Ongoing uncertainty stemming from the European sovereign and banking crisis is leading to broader contagion outside Europe and global credit markets."

European nations are currently grappling with a sovereign debt crisis that is threatening the euro and European Union itself. Several nations have already received bailout funds from the International Monetary Fund and other bodies, but larger and larger economies are moving to the centre of the crisis —increasing the impact on the global economy.

'Households don’t operate like this and neither should countries.'—Finance Minister Jim Flaherty

Canadian government officials have urged the continent's policymakers to tackle their growing debt loads with concrete solutions for months, a message the finance minister continued on Friday.

He trumpeted the Conservative government's fiscal record, and urged his European counterparts to get their fiscal houses in order.

The Harper government ignored Opposition calls for more spending during times of plenty, electing instead to pay down debt, Flaherty noted in his speech. That gave Canada the flexibility to give the Canadian economy a $60-billion shot in the arm when it needed it during the 2008 slowdown, he said.

"Our effective response to the 2008-09 crisis was not simply good luck," he said. "We had a number of advantages going into the crisis that made its effects much easier to handle once it arrived."

He says debt-laden governments need to get their spending under control and make tough decisions about what their priorities will be. The consequences of not doing so will be "widespread social unrest," he said.

Prime Minister Stephen Harper discussed the economy briefly at an event in Vancouver on Friday, saying the economy is still his government's main priority.

"Canada has come through the global recession better than most – in fact, countries around the world are looking at us a model," Harper said.

"But as we have seen, the global economy remains very fragile. Canada is not immune to the problems afflicting economies outside our country," he said. "We must not and we will not be complacent."

He said the government would keep working to create jobs and build a foundation for long-term growth.

Budget consultations

Canada is on track to have a debt-to-GDP ratio of 34.9 per cent this year. That contrasts with 57.2 per cent for Germany, 72.6 per cent for the United States, 72.9 per cent for the U.K., 81 per cent for France and 100.4 per cent for Italy.

The G7 average net debt to GDP is about 80 per cent, Flaherty noted.

Flaherty said it's time for governments to take the advice they give to their own citizens: live within your means and save for a rainy day.

"Households don’t operate like this and neither should countries. When your credit card is maxed out, you don’t go out and get another one and continue to accumulate debt at 18 per cent interest,'" he said. "Instead, you figure out a way to restrain your spending and you increase your payments to reduce your debt."

Flaherty said he's about to start national consultations for the next federal budget, due early in the new year. He said he especially wants to work with his provincial counterparts to "strive together to usher in a post-recovery era of fiscal discipline and fiscal responsibility."

He did not name any federal programs that may be targeted for cuts, nor did he say specifically where Ottawa is looking to reduce its spending. But he took a tough line against anyone suggesting more spending or new government programs, saying this is not the time for "dangerous" or "risky" spending schemes.