Harper says time running out to tackle eurozone's woes

Prime Minister Stephen Harper says Europe has so far avoided a "catastrophic event" that could throw the global markets into turmoil, but that a "broader game plan" is needed to deal with the economic woes plaguing the continent

'We are kind of running out of runway here,' Harper tells CBC's Peter Mansbridge

Peter Mansbridge sits down with Prime Minister Harper in London, to talk Eurozone crisis and his relationship with the media. 18:14

Prime Minister Stephen Harper says Europe has so far avoided a "catastrophic event" that could throw the global markets into turmoil, but that a "broader game plan" is needed to deal with the economic woes plaguing the continent

"Although our European friends have done a great job of avoiding a catastrophic event over the past four years, the fact is that we are now four years into this crisis and we do not have definitive solutions," Harper said during an interview with CBC's chief correspondent, Peter Mansbridge.

Harper said the United States, facing its own financial crisis in 2008 and 2009, "decided to put all energies towards dealing with the crisis, they contained the crisis and reversed it. And the same thing needs to be done here."

Speaking from London, where he attended the Queen's Diamond Jubilee celebrations, Harper noted that many European countries are struggling with recession, sovereign debt crises and banking-sector woes.

The Bank of Canada said Tuesday that those problems have worsened in the past few weeks — so much so that they have prompted a "sharp deterioration" in global financial conditions. The latest crisis concerns the solvency of European banks, particularly those in Spain, but a Greek exit from the eurozone following mid-June elections also looms as a potential shock.

"I do think in a sense, here, I don't want to sound too alarmist, but we are kind of running out of runway here," Harper said Monday. "And in terms of structure of the eurozone and in terms of addressing some of these problems, we do need to see the broader game plan."

"We just can't say, 'Let's wait until the Greek election.' We cannot have a Greek election determining the future of the global economy, that's not fair to anybody."

When asked how much room is on the runway, Harper said there is "still some room" but "we just can't constantly deal with short-term problems — we've actually got to have a plan to make this a stable situation."

Harper will meet with François Hollande, the newly elected French president, in Paris on Thursday.

Euro will change

As Europe works to contain the crisis, the structure of the eurozone and its central institution must be subject to serious examination, the prime minister said.

Prime Minister Stephen Harper is in London with his family to take part in events for the Queen's Diamond Jubilee. (Sean Kilpatrick/Canadian Press)

"In a time of crisis, to sustain the euro they have to do a much bigger job of integration than they have done until this point," he said.

"The euro in its present form will change," he said. "Hopefully it will be changed because leaders recognize changes have to be made and act in concert to do that — or the alternative will be it will come apart one country at a time, and that would be very bad for everybody."

The euro traded lower Tuesday as traders reacted to a communiqué after a conference call among finance ministers of the world's seven wealthiest economies focused on trying to find a way out of Europe's debt crisis.

Harper said Canada's exposure to troubled European economies and financial institutions "is not high," but that Canada is part of a global economy, and if things get "bad enough" Canada will feel it.

He didn't offer specifics, but said Canada has contingencies in place, noting that the Bank of Canada and the financial sector could make moves to minimize the effects of a crisis and "preserve the health and liquidity of the Canadian financial system" if needed.

Economists say the most immediate result of European contagion would be through a reduction in global demand for Canadian exports, including oil, and a fall in commodity prices. An accompanying stock market plunge would sap wealth from Canadian households and a credit squeeze would also slow economic activity.

'Take the longer view'

When asked what he would say to Canadians concerned about their retirement savings, Harper said: "I'll give the same advice I gave before, which maybe I didn't express well at the time — which is always to take the longer view.

"As prime minister, I am not allowed to invest speculatively and so I don't — but to the extent I advise people, as we do with the government, think about what you need to do in the long-term to grow your portfolio."

"Be in markets and places where the business is good, where the long-term prospects are solid, and focus on that."

PM doesn't read Canadian media

The prime minister also spoke about the "great outpouring of affection" for the Queen at the Jubilee and his view on the relationship between journalists and politicians.

"What I'm reading about the relationships here — maybe it's been different under previous prime ministers — but I couldn't imagine that in Canada."

He said politicians and people in the media often know each other, but that he felt there is a "sense of distance, as well, that I think is actually essential for both of our jobs."

The prime minister said he doesn't read Canadian media, preferring to have his staff compile a review of the major stories of the day.

"I want to get the view the public gets of media reporting," he said.

He said he doesn't obsess over the nuance of every editorial or article and tries to get a "big picture" of what the public is seeing and hearing, as well as how the public is responding.

"But other than that, I need to be able to keep my head clear and focus on whether decisions are right or wrong."

With files from The Canadian Press