Flaherty ramps up war of words with European leaders

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Jim Flaherty is escalating his war of words with European leaders just days after he ruffled feathers in Washington during the recent meeting of the International Monetary Fund.

In an opinion piece published by London's Daily Telegraph on Tuesday, Canada's Finance Minister says it's time to limit Europe's voting influence over the IMF.

With 34 per cent of the votes at the IMF, Mr. Flaherty said, that gives Europe a "relatively low threshold" for tapping in to the global fund aimed at stabilizing the world economy.

"Emerging markets play an increasingly important role in global economic issues," he wrote, noting that Canada supports giving more influence to emerging markets over the IMF. "In this context, we believe that measures should be taken to ensure that major decisions about resources dedicated to Europe require more than a simple majority."

The piece was submitted at the request of the Telegraph after Mr. Flaherty's public comments in Washington.

Several European leaders were clearly irritated at that meeting by Canada's refusal to contribute more money toward the IMF. They had come to Washington arguing that Europe had done enough and "now it's up to our global partners," according to one European Central Bank official.

The dispute comes at a time of growing resentment in Europe over government austerity measures. There were widespread May Day protests Tuesday and some incumbent governments – including in France – are at risk of defeat.

Mr. Flaherty praises Europe for its fiscal reforms and stronger firewall, yet says more needs to be done to tackle the internal imbalances that he says continue to threaten Europe's monetary union.

He argues that Europe failed to approve a big enough fiscal stimulus plan in the wake of the 2008 crisis and continues to struggle as a result of its "muddle through" approach.

"Ultimately, the adequacy of the actions taken will be judged by the markets," he wrote. "Repeated expressions of confidence by politicians are futile if the markets continue to cast their vote of non-confidence. The markets' confidence in political leadership will only be restored when it is clear that politicians are willing to see the full scope of the problem, to focus on the key issues instead of pursuing sideshows such as the financial transactions tax, and to set out and implement a plan for tackling these issues."