Prime Minister Stephen Harper is chastising his international peers on the eve of key meetings of the G20, blaming the risk of a full-blown global recession on their failure to contain a growing debt crisis.
Clearly aiming to inject a heightened sense of urgency to talks that begin this week in Paris, Mr. Harper says there is still time to avert a recession if leaders act now.
Writing in today’s Globe and Mail, Mr. Harper touts Canada’s fiscal record and insists the G20 agreement reached last year in Toronto under his chairmanship remains the best way forward. The pitch comes as Ottawa is actively promoting Bank of Canada Governor Mark Carney as the next head of the Financial Stability Board, the international body responsible for global banking rules.
“We cannot afford any more missed opportunities,” Mr. Harper writes, warning that further delay will only increase the public cost of solving the problem. He says that “unless decisive action is urgently taken, our nations will once again be forced to respond to a full-blown global recession, albeit this time without the full arsenal of policy weapons at our disposal.”
Mr. Harper’s reference to “policy weapons” underscores the concern that with near-zero interest rates, central bankers of struggling economies can’t boost economic growth with further cuts to borrowing costs. At the same time, highly indebted governments no longer have the fiscal room to boost growth through deficit spending.
The tension generated by Canada’s push for stronger banking regulations blew up publicly last month when word leaked that Mr. Carney’s calls for banks to retain extra capital were strongly criticized behind closed doors in Washington by Jamie Dimon, the head of JPMorgan Chase & Co. A few days later, it emerged that Canada is pushing Mr. Carney for the international board.
The stakes for this fall’s meetings of the G20 have risen considerably since French President Nicolas Sarkozy and German Chancellor Angela Merkel announced earlier this week that they will not release details of their plan to recapitalize European banks until the Nov. 3-4 summit in Cannes, France. Finance ministers and central bankers of the G20 arrive in Paris on Thursday for advance meetings that will attempt to craft the outline of a plan that can be approved by world leaders less than three weeks later.
Since the G20 emerged in 2008 as the premier economic forum for decisions on the global economy, the pattern has been that a considerable amount of the work is accomplished beforehand among finance ministers and central bankers.
That may explain why the Prime Minister is using such strong language now.
“Both Europe and the G20 have important roles to play in restoring market confidence and protecting the fragile global recovery,” he writes. Mr. Harper’s prescription calls on Europe to take “immediate and decisive” action to resolve debt and banking-system issues that are strong enough to “overwhelm the problem.”
As for the G20, he calls for action on many of the pledges the organization has made previously, including last year in Toronto. Among them, Mr. Harper calls for clear and credible debt- and deficit-reduction plans, “meaningful action” to increase exchange-rate flexibility, an “unequivocal commitment” to financial-sector reform and a continued pledge to resist trade protectionism.
Mr. Harper said Canada will be “well ahead of schedule” for meeting the G20 deficit and debt targets set at the Toronto summit. On Wednesday, Finance Canada released new data showing the federal deficit for 2010-11 came in at $33.4-billion, which is lower than the $36.2-billion projected in the June budget.
2009: The year world leaders meet in Pittsburgh at the onset of the global recession. They declare the G20 as the premier forum for international economic co-operation and approve an unprecedented wave of co-ordinated economic stimulus to the world economy.
2013: The target date set by the G20 in Toronto last year for nations to cut their deficits in half.
2016: The Toronto G20 deadline for members to stabilize or reduce their ratio of government debt to gross domestic product.