Prime Minister Stephen Harper sat down with Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney on Tuesday to tackle the economy, CBC's Laurie Graham reports
This week on The House, with Europe tethering on the brink of financial collapse, finance ministers and central bankers from around the world have gathered in Washington, D.C., to find a solution. Bank of Canada Governor Mark Carney is there. He says the issue that could affect Canada is not whether Greece will default or not, but whether Europe's monetary union can handle the crisis.
Prime Minister Stephen Harper emerged from a meeting with Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney in Ottawa saying the world economic picture is "not so positive."
Flaherty and Carney were briefing Harper Tuesday on last weekend's meetings in Washington with the International Monetary Fund and G20 finance ministers and central bankers.
The update was to prepare Harper for a summit of G20 leaders in Cannes, France, on Nov. 3.
Flaherty and Carney meet regularly, but it is less frequent that they also confer with the prime minister as well.
Harper said he heard positive comments about the Canadian economy during his recent visit to the United States, but growing concerns about the global economy have raised questions about what the fallout will be in Canada.
"I know we heard some interesting things about the economy. I think we're all finding that people are pretty positive about what we're doing here," Harper said.
"But we're in a world picture that is not so positive, and that clearly is going to demand that we spend a little bit of time looking at it. So we're going to compare some notes."
The meeting underscores their continuing concerns about Europe’s debt crisis, a slowing global economy and continuing volatility in world financial markets.
That volatility continued Tuesday, with North American stock markets surging amid optimism that a deal is close on measures to protect European banks from their exposure to debt-burdened countries such as Greece, and to prevent the spread of a financial crisis to larger economies such as Italy and Spain.
The Canadian dollar gained three-quarters of a cent to close at 98 cents US, just a day after briefly trading at a one-year low against the greenback.
Bailout coming, Greek finance minister says
The optimism in markets followed comments by the Greek finance minister that his country would receive new bailout loans and avoid default and a statement by German Chancellor Angela Merkel that her country would do whatever it could to help Greece regain investors' confidence.
Germany is Europe’s biggest creditor nation.
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At last weekend’s G20 session, Flaherty pushed for an increase in the size of the European Financial Stability Facility, the fund set aside to inject cash into banks in the region in the event of a financial crisis.
In an interview with Evan Solomon, host of CBC Radio's The House, Carney said the fund should be expanded to €1 trillion ($1.39 trillion Cdn) immediately, from its present size of €440 billion ($610 billion).
The fear is that a failure to contain the crisis will push a weak global economy into a full-fledged recession.
While markets appeared to see action as imminent, there were still no definitive announcements about increasing the size of the fund.
Last Thursday, Harper and British Prime Minister David Cameron ended their meeting in Ottawa with a call for European leaders to take decisive action in order to avoid a second downturn.
"Neither of us will be accused of exaggeration if we acknowledge that the most immediate test confronting us all is to avoid the devastating consequences of a return to global recession," Harper said.
Governments must commit to cutting their debts and deficits and to resisting protectionism or a recession won't be avoided, he warned.