The survival of the global recovery now depends on “strong, united and decisive leadership” in advanced as well as emerging economies, Finance Minister Jim Flaherty said Wednesday.
Speaking to a business audience in New York, Mr. Flaherty reinforced earlier calls by top Canadian and U.S. officials for euro-zone leaders to bolster the European Financial Stability Fund so it can adequately address the continent’s crisis and shield banks that are saddled with some of the riskiest sovereign debt. European governments need to speed up their approvals of the beefed-up fund, he said.
Also, without naming China, Mr. Flaherty also said emerging markets with fixed exchange rates need to recognize their role in ``rebalancing” worldwide demand by letting their currencies appreciate. Doing so would help support exports from struggling advanced economies, by taking away what many U.S. lawmakers and officials say is an unfair leg up for goods produced in nations that keep their exchange rates artificially low.
“Our chief enemies now are uncertainty and delay, which will only cause more difficulties, make resolving the situation more expensive and create increased volatility,” Mr. Flaherty said in a speech to the Canada-U.S. Securities Markets Summit, according to excerpts released in a statement from his office.
“Global uncertainty is a major inhibitor to growth. With headwinds re-emerging, we must return to strong, united and decisive leadership, especially by the G20 nations, to effectively address our current economic and fiscal challenges,” he said. ``In today’s difficult conditions, we need people, organizations and countries that show strong political will, decisiveness, and clarity.”
The Minister also repeated calls for ``credible medium-term” deficit-cutting plans in countries with large budget shortfalls, and again hinted that he would slow Canada’s path to a balanced budget in the event of another global downturn.
“Such plans have to be pragmatic and flexible, as Canada’s are, should the global economy falter,” Mr. Flaherty said.
Speaking to reporters after his speech, Mr. Flaherty also said he is not planning further actions to cool Canada’s housing market. The Minister has moved three times in the past couple of years to try and limit the number of borrowers who are taking on debts they won’t be able to afford when interest rates eventually rise, an issue that promises to be important for much longer with the Bank of Canada’s benchmark rate expected to be held at 1 per cent until late next year or into 2013.
With a file from Bloomberg