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Stephen Harper in an interview with the CBC’s Peter Mansbridge

Prime Minister Stephen Harper in an interview with the CBC's Peter Mansbridge. Conducted in London, England June 5, 2012.

PETER MANSBRIDGE: Well Prime Minister, it's been quite a three or four days here in London, and you've been a part of at least the last couple. What does it say to you when you see the kind of response that the Queen had here in London?

STEPHEN HARPER: Well I think it says a lot of things, Peter. I think first of all, there is a great outpouring of affection for sixty years of really incredible, selfless, dedicated service. I do think also, you probably can't really feel it if you're here, for so many people it's in effect a sweep of history and for so many people particularly in the British nation it conjures up all kinds of emotion. It's been a tremendous outpouring, a great experience. I read about Sir Wilfred Laurier here 115 years ago and what it was like but you can't really get the feel until you're here and really see the crowds and the range of emotions that they are expressing.=

MANSBRIDGE: And many of those emotions are tied directly to their feeling towards her, for obvious reasons. Does it say anything about the monarchy and the future of the monarchy, what we witnessed? Or was it really all about her?

HARPER: I think it's hard to separate the two. I think the fact that Prince Charles really led the royal part of the celebrations at the end of the concert last night and received such a warm response from the crowd I think does speak to the broader future and narrative of the monarchy as well and obviously there's a lot of emotion around the health of the Duke of Edinburgh also. I think with events, what I saw last night, sometimes with events that conjure up powerful emotions, as I say, respect, dedication, affection but also kind of the awe, and all the experiences people have had, both the nation individually and collectively over the 60 years, I think it's sometimes hard to categorize these emotions, they just are what they are.

MANSBRIDGE: I want to move on to something that in some ways this weekend has masked, at least here in Britain, and that is what many feel is an impending doom and gloom in terms of the European economy, certain sections of it and the impact that can have on the global economy. How bad is the situation in your view?

HARPER: Well first of all, Peter, I think it is important to point out that here and in many parts of Europe the economy is actually in recession. It's in recession now. Obviously this is worrisome. There are both sovereign debt crises going on and there are banking crises that are still very active, and they are all interconnected in this part of the world and ultimately have interconnections elsewhere. And although our European friends have done great job of avoiding a catastrophic event over the last four years, the fact is that we are now four years into this crisis and we do not have definitive solutions. Nor do we have, in my judgment, necessarily a game plan for all the various eventualities we could see over the next few months. So obviously we are urging our European friends to work hard on those contingencies.

MANSBRIDGE: You sound like you're being polite though in terms of what they have accomplished over the last four years, because in many ways it seems they have not accomplished anything, the situation keeps seeming to get worse...

HARPER: Well, they have avoided a Lehman Brothers type event, and that's what they have been clear on all along, that unlike what happened in the United States in 2008, they don't want a catastrophic event that literally throws the entire global marketplace on every level into turmoil. And they have avoided it so far. They have avoided it through periodically determined yet short term action. And I think Peter you hit on it exactly. We are four years in. 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, in terms of the structure of the Euro zone 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.

MANSBRIDGE: That's only a few weeks away, how much room is there on the runway?

HARPER: There is still some room, but we just can't constantly deal with short term problems, we have actually got to have a plan to make this a stable situation. For all the criticism the United States took in late 2008, early 2009, the fact of the matter is that once the United States decided to act, through the TARP, through the stimulus, once the United States 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.

MANSBRIDGE: How vulnerable is Canada in the midst of all this?

HARPER: Peter, you know, we are not vulnerable as even a first or second wave. Our exposure, both our banking exposure and sovereign exposure, to troubled European economies, to troubled European financial institutions, is not high. However, we are exposed to others that are exposed to others.

MANSBRIDGE: I'm lost, what does that mean? Does that mean that eventually the Canadian banking system or parts of it are exposed?

HARPER: Well, just to be frank with the Canadian public here, the same thing we saw in '08, '09, although our banking system remains the strongest in the world, universally recognized as such, although were not directly exposed to the troubled parts of the global banking system or the global sovereign crisis, the fact of the matter is that we are exposed to others who are themselves exposed to others who are themselves exposed to those problems. And so, if the thing gets big enough it will affect everybody, it's going to affect everyone potentially through the financial sector and certainly if the European recession gets deep enough it will affect everybody. The fact of the matter Peter, is that I am told already by my counterparts around the world that it has already been affecting most other economies. North America has been relatively immune until this point in time but if it gets much deeper it will affect all of us. It is essential it is dealt with. We do have contingencies in place to minimize the impact on us as we did in '08-'09.

MANSBRIDGE: – Like what?

HARPER: Well, there are various things that can be done certainly by Bank of Canada and the financial sector to preserve the health and liquidity of the Canadian financial system. But that all said, if things get bad enough in global economy, we are part of the global economy, we will be affected which is why we work diligently with our partners through myself, with the minister of finance, through the central bank governor, to try and identify solutions for some of our partners.

MANSBRIDGE: You have a calm look on your face but you sound worried.

HARPER: I am concerned. Look Peter ever since mid '08 I have been constantly worried. We remind Canadians of two things constantly: that Canada is doing better, much better, and our mid-to long-term fundamentals are much sounder than virtually the rest of the developed world. At the same time, we are in a global economy that has been recovering and that recovery is very fragile. I keep saying that. I think sometimes people think when you say things often enough, it's just a mantra. It's not just a mantra.

MANSBRIDGE: It sounds like it's more fragile now...?

HARPER: We are in a fragile situation, it is more fragile now. And we are getting increasingly to the stage where short term solutions are not going to be sufficient.

MANSBRIDGE: And some of those short term solutions, perhaps they weren't short term when they were first proposed, but the signals seem to be confusing on this. In the last week or two we have heard different leaders – not just from Europe -- but suggesting that perhaps now is time for both austerity and growth at the same time. Listen, I'm not an economist, you are – how can you do that?

HARPER: I don't think there is a contradiction there at all Peter. How I would phrase it is that fiscal discipline and growth are not only both necessary, they are both essential. If you take those two phrases and say by fiscal discipline you mean cutting, and by growth you mean spending, then yes they are incompatible. But I don't think it's that simple of equation. I do think that all economies need a sense of fiscal discipline especially over the midterm and if you are in the middle of a debt crisis you can't borrow your way out of a debt crisis. That's logically impossible. But at the same time you do need, as we are doing in Canada, you need to undertake a range of measures, not just fiscal discipline, to ensure growth. We have an ambitious trade agenda, we are revamping our science and technology policies to get better results, as you know we're doing labor market reforms, were doing regulatory reforms. These are all things that need to be done to increase the growth capacity of our economy. Where I occasionally get troubled when I hear some leaders who are in the midst of, let's face it – very, very difficult fiscal and public opinion situations, things that are nowhere close to the kind of situation we experience, when I hear some leaders talking that way, and they say growth, it sounds like they are looking for some easy way to deal with the problem when in fact the changes you have to make in terms of growth policies are often politically very challenging as well.

MANSBRIDGE: When you talk about having to have a contingency plan, a kind of plan B, is this impact the kind of economic measures you've had in the last budget, or last year? Is that the kind of thing we are talking about?

HARPER: No, I don't think it's helpful for leaders to speculate on catastrophic scenarios, there's every reason we should avoid those, Peter. Europe remains, for all its troubles, one of the richest parts of the world. It has the capacity, if it can get the will and coordination, to deal with these problems. But if we found ourselves in catastrophic situations as we did in '08-'09, these would be additional things we would have to do.

MANSBRIDGE: What about the Euro? We hear increasing suggestions, some from some key people, that it's time is over. That the Euro should be done. What would happen if it was?

HARPER: Well I think that would be a very tough evaluation one that I wouldn't share. The way that I would put it Peter, and I'm not trying to be diplomatic. I'm trying to be more nuanced and realistic. I think what has to happen is there has to be a serious examination of the shortcomings of the Euro structure. Euro central institutions, whether it be fiscal policy, monetary policy, financial regulation, are simply not as robust as they are in a currency that has a national government behind it. And for whatever reasons those things weren't felt necessary when Euro was conceived. But 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. The Euro in its present form will change. Hopefully it will be changed because leaders will recognize changes have to be made and will act in concert to do that, or the alternative will be that it will come apart one country at a time. And that will be very bad for everybody.

MANSBRIDGE: Why would that be very bad? Or not why would it be very bad, but how would it be very bad?

HARPER: You can have the economists tell you the effects that has on speculation and bond markets, and everything else, and the effect on the banking system. But if you have unplanned exits, as we saw with Lehman Brothers -- any big unplanned major shock to the financial system is never a good thing.

MANSBRIDGE: Last point on this and it brings it down the level of those at home. I know you don't like, at least any more, talking about what people should do in the markets, or even suggesting what they might consider. But you know as well as I do that a lot of people out there are taking a beating with their RRSP's, which is a major concern, over these last six months. What should they do? Because every day brings these kind of stories and discussion about how bad things could get and contingency plans and plan B and this and that and it all seems to have impact on things as simple as Joe Blow's RRSP.

HARPER: Well Peter, I'll give the same advice I gave before. Which maybe I didn't express well at the time, but 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. Things will go up and down in short term, they always do. It's been more spectacular over the last five years than in 80 years, but nevertheless those things come and go, there will always be solid businesses and solid markets will always experience growth over time. Have a mid- to long-term game plan and stick with it.

MANSBRIDGE: – So don't cut and run from the market?

HARPER: Don't cut and run. And that's what our financial institutions do. That's why we have the most solid financial institutions in the world. They don't think that way. They don't cut and run and they don't get involved in a lot of short term speculation.

MANSBRIDGE: You know, we are sitting here with Westminster in the background here, and there was a rather remarkable meeting in there last week, where former Prime Minister Tony Blair came in as part of the hacking scandal and trying to understand what was going on there in terms of the relationship between politicians and media. He basically said that to get his agenda through that place he had to develop a close relationship with the media giants in this town. He made it sound like he had to suck up to them to get his agenda through. Is that something peculiar to this place?

HARPER: Well it can't be the same for me, because I have never had that kind of relationship and I'm still around after six and a half years. What I would say is this Peter, the media is tremendously important, and it's important for our government and all governments that we are able to communicate our story through the media. It doesn't mean there is a balance of editorial opinion that favors what you are doing or that the opposition doesn't have its voice, but you have to be able to effectively communicate your story through the media. You have to be able to do more than that in my judgment. I constantly tell my caucus and cabinet it's not sufficient in the internet age to communicate through the media; you have to be able to do it on the ground, door by door, coffee shop by coffee shop, shop floor by shop floor. You really have to do that as well. 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. It's not that you or I don't know people in the media, or in your case, people in politics, but my sense is that there is a sense of distance as well that I think is essential to both of our jobs. We have to ultimately do what we believe is in the broader public interest, not just the interest of the media, which after all is only one segment of the Canadian economy. And you guys have to ultimately be able to deliver what you think is independent reporting.

MANSBRIDGE: Do you read it? Do you read Canadian media?


MANSBRIDGE: ...Seriously?

HARPER: No. My staff every day gives me a review of the headlines, a review of the major stories on television, just an overview. I want to get the view the public gets of media reporting. The public sees the big picture. They don't get into every single editorial, or is every single, you know – is every singlereference of me positive or negative? I don't need to know that stuff. I would go crazy if I spent all my time obsessing on that stuff. I need to know the big picture, what's the public hearing and seeing and to the extent that they are able to communicate back, what they are saying. But other than that, I need to be able to keep my head clear, and focus on whether decisions are right or wrong.

MANSBRIDGE: There was a time when you said that actually the media you watched was the American media to find out what was going on.

HARPER: To the extent Peter, before I got into this world of being the Prime Minister of Canada, I was a bit of a news junkie and politics junkie. So to the extent I enjoy doing that I'll now enjoy watching the US presidential race and hearing it analyzed inside out. But I'm not interested in hearing myself analyzed inside and out. I'm sure much of it is useful and insightful but in the end, I am not an objective judge on that kind of stuff. I have to do what we think is the right thing for the country.

MANSBRIDGE: Alright, Prime Minister, thanks very much.

HARPER: Thanks for having me.