While the rest of Canada prospers, Ontario's economy is hurting under the current set-up of the country's $12-billion equalization program, Finance Minister Greg Sorbara said Friday.

He made the comments in advance of a Vancouver meeting of provincial and federal finance ministers, during which they hope to hash out reforms to the equalization program.

Ontario is seeking relief for Central Canada's economy — including Ontario and Quebec — especially as the West, North and East appear to be doing well, Sorbara said.

"Both provinces, and particularly Ontario, are under significant economic pressure and it is rooted in the manufacturing sector," he said.

In the case of Ontario, he said, taxpayers in his province are burdened with having to deal with a "double whammy" of an economy under pressure and "fiscal machinery that is broken."

Equalization reform was part of the Tory government's election promise to fix the so-called fiscal imbalance between Ottawa and the provinces.

Equalization payments

The other key aspect was to boost per-capita transfer payments to all provinces for health, post-secondary education and other social services.

At the moment, only Ontario, Alberta and Saskatchewan do not receive equalization payments.

Federal Finance Minister Jim Flaherty said Friday he did not expect an agreement on fiscal imbalance to be reached in Vancouver, but promised Ottawa would find a remedy for the program if necessary.

He said he would deliver the promise to fix the fiscal imbalance in his next budget, which could trigger a spring election.

A report earlier this year proposed boosting equalization payments to poorer provinces and basing the amount to be doled out on the average fiscal capacity of all 10 provinces. Only five provinces are included in the current equation.

Saskatchewan and Alberta raised concerns about that idea, since adopting the proposal would have also taken into account 50 per cent of resource revenues. The argument from the oil-rich provinces was that factoring in resource revenues would significantly lower their equalization payments.

With files from the Canadian Press