Prime Minister Stephen Harper and other G20 leaders are preparing to meet on Monday in Los Cabos, Mexico, but all eyes are on Greece as its voters head to the polls on Sunday for the second time in six weeks.
In an interview that aired on CBC Radio's The House, federal Finance Minister Jim Flaherty — who will be travelling with Harper to Mexico — told host Evan Solomon he is hoping there will be an "unambiguous result" at the polls.
An inconclusive outcome could have an impact on financial markets and "create even more uncertainty than exists right now, which is undesirable," Flaherty said.
Last month, Greek voters rejected tough austerity measures imposed on them in return for two multibillion-euro rescue packages. They voted instead for fringe parties that promised to ditch the belt-tightening measures.
The fear this time around is that if Greeks vote for the anti-austerity parties in Sunday's election, it could result in the country defaulting on its debts and getting kicked out of the eurozone.
When asked whether Greece might exit the eurozone, Flaherty said that was "up to the voters."
Flaherty described the debt crisis in Greece as "very serious," but added that he was "much more concerned" with the economic turmoil in Spain. The government in Madrid has accepted a bailout for its cash-strapped banks, but some world leaders fear Spain, the fifth-largest economy in Europe, might need a much larger bailout to get its debt under control.
"That's a large economy; that's an economy comparable to Canada's," Flaherty said.
The European debt crisis is not confined to Greece and Spain. Portugal and Ireland have already received bailouts, while Italy continues to be mired in debt.
While countries outside of Europe have pledged billions of dollars to the International Monetary Fund to stabilize the world economy if the need arises, Canada and the United States have rejected the idea.
Canada is not prepared to dedicate "Canadian resources to help bail out relatively rich European countries," Flaherty told Solomon.
Canada's position has been to encourage Europeans to shore up their own funds and build up a firewall that would signal to the markets that EU members are prepared to support their own.
Flaherty did not want to speculate about conditions under which Canada might boost its IMF funding, saying only the situation would be different if the Europeans proposed a plan and said they didn't have "adequate resources."
"If it ever came to that — that they didn't have adequate resources — then that would be different," Flaherty said. "I don't think they'll ever be able to show us they don't have adequate resources."
The finance minister said he did not expect Europeans to come up with a plan during the G20 leaders summit in Mexico, but rather expected them to find a solution at a meeting of the European Council at the end of June.
Risk to Canada
In an interview with CBC's chief correspondent Peter Mansbridge last week, the prime minister said Canada had "contingencies" in place to minimize Canada's exposure to the euro debt crisis.
"We can get buffeted if there's a serious banking meltdown in the euro zone," Flaherty told Solomon.
Although the finance minister did not elaborate on the specifics of a contingency plan, he gave some idea of when one might be put in place.
"If we had disorderly markets … that extended from Europe into the U.K. and the U.S., and the entire banking system and credit started to contract because of a loss of confidence between banks, then you start to have liquidity problems in the banks, that's when governments need to act.
"It's a very serious matter once these dominoes start to fall," Flaherty said.
The impact of credit restrictions could result in Canadian businesses having trouble borrowing, hindering their ability to invest. That could affect the job market and lead to increased unemployment, Flaherty said.
"That's why we have to act early on, as we did in 2008, to make sure things don't accelerate," he said, referring to the government's economic stimulus package in early 2009.
Flaherty has left the door open to another round of stimulus spending should global economic conditions worsen.