June 28, 2010

Canada stands firm on stimulus funding at G8, G20 summits

VINCE VERSACE

staff writer

A key Canadian message at the current G8-G20 summits is that advanced economies should see their stimulus plans through but with an eye to tightening purse strings.

“The PMO (prime minister’s office) has been clear that there is a need for fiscal consolidation for those countries now experiencing unsustainable sovereign debt levels,” said Len Edwards, G8-G20 sherpa, during a Saturday morning G8 briefing from Muskoka.

“On the other hand, there is also the view, that fiscal consolidation plans need to be implemented in a growth friendly way,” added Edwards. “Those countries with the capacity and stimulus plans in place should continue their stimulus throughout the rest of this year.”

Canada continues to stand firm on its March, 2011 stimulus project funding deadline and there have been no indications, thus far at the G8 summit, that this will change. The PMO believes that stimulus plans, where they are needed, should not be dismantled and a focus on fiscal consolidation should then follow.

The priorities set out for nations at the G20 Toronto summit are: securing recovery and restoring balance to public finances, reforming the global financial system, strengthening international financial institutions and liberalizing trade and investment.

At tonight’s opening G20 Toronto working dinner session, Prime Minister Stephen Harper is expected to acknowledge “the good work” the G20 has done to coordinate stimulus policy to successfully help “stave off” one of the worst global economic recessions, said Dimitri Soudas, Director of Communications for the PMO.

Sourdas added that Canada will encourage countries to commit to reducing fiscal deficits by 2013 and to placing their debt to GDP ratios on a downward path. Considering the financial measures G20 nations committed to, at the recent Washington, London and Pittsburgh summits, Canada would like to find ways countries can continue to work more closely to align policies as best they can.

“We believe that things can move ahead a bit faster, a bit more aggressive,” said Sourdas.

Leaders at the 2008 G20 summit in Washington agreed to a set of fiscal and monetary actions that injected $5 billion into the world economy. At the 2009 G20 in London leaders agreed to measures that provided $1.1 trillion in stimulus and an additional $750 billion for the International Monetary Fund (IMF).

Despite improving growth outlooks, global growth has not yet returned to pre-crisis levels of five per cent per year from 2004-2007, G20 documents note. The only G20 nations surpassing pre-crisis growth levels this year are Canada, South Korea, Indonesia and Mexico. The G20 nations predicted to furthest from their pre-crisis levels (over two per cent below on average) are Argentina, Russia, Turkey and South Africa.

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