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Harper, Obama urge G20 measures Prime Minister Stephen Harper is urging his G20 counterparts to agree to deep cuts in their deficits. One of the few world leaders who can boast what markets see as a strong fiscal standing, Mr. Harper said in a letter to G20 countries, who will meet in Toronto this month, that he wants advanced economies to cut their deficits in half by 2013 and have their overall debt-to-GDP measures stabilized three years later. "Advanced countries must send a clear message that as their stimulus plans expire they will focus on getting their fiscal houses in order," Mr. Harper said. "This requires credible plans for fiscal consolidation to dispel the uncertainty and financial volatility that can impair future growth prospects."

Canada has won global praise for its economic outlook and its handling of public finances, which has drawn investors into the Canadian dollar, which puts Mr. Harper in a strong position to give advice.

Separately, President Barack Obama urged his summit counterparts, also in a letter, to pledge continued "policy support" for the economic recovery. Mr. Obama said that "we should reaffirm our unity of purpose to provide the policy support necessary to keep economic growth strong ... we should be prepared to respond again as quickly and as forcefully as needed to avert a slowdown in economic activity."



Europe's governments cut back European governments are in the midst of a sweeping overhaul of their finances, which includes changes to social programs that have sparked anger and protests among their citizens. From raising retirement ages and other fixes to pension systems, to cuts to public sector costs, Europe is changing what for years has been a certain way of life for many.

Bloomberg News provides an interesting look at Greece's pension system, seen as a major problem for its government as it scrambles to slash its deficit. It has been criticized on many fronts, and is a target of the cutbacks. The news agency looks at one woman as an example, Sophia Constantinidou, a teacher at a private school in Athens who, because she is not married, gets €400 a month from the government that is part of the state pension of her late mother. As the only surviving child of the late public servant, she gets that money for life as long as she remains single.

Bloomberg notes that there is one pensioner in Greece for every 1.7 workers, and more than 600 occupations the government deems arduous enough for earlier retirement, including steam bath attendants, car washers and hairdressers. While those appear to be the examples on the extreme side, it's no wonder that Prime Minister George Papandreou is cutting back on early retirement.

Short euro, Barclays says Here's a vote of confidence: Barclays PLC analysts say investors should short the euro in anticipation of a fall. "We are prepared for an erratic corrective rally," they said in a research note, according to Bloomberg News.

Russia seeks key economic role Russia aims to be part of the "new world economic order." Already the 'R' in the BRIC countries - the emerging power economies that also include Brazil, India and China - Russia will push ahead with free market policies to build a "modern, prosperous" country, President Dmitry Medvedev told an international forum today. "We understand that international competition is the decisive stimulus for our modernization," the president said. "Russia should become an attractive country to which people from the whole world will come in search of their dreams," he said.

Japan to cut corporate taxes The Japanese government said today it will cut corporate taxes to help spur economic growth. The new government is targeting real growth of more than an average 2 per cent over the next decade. Analysts suggest the new governments goals are too lofty, particularly given that the country has a huge fiscal problem and needs to raise funds to slash its deficit. Economists told the Reuters news agency that Prime Minister Naoto Kan's government should commit to raising its sales tax to 15 per cent or 20 per cent over the next 10 to 15 years to help meet rising costs.

How spill could boost oil sands One of the side effects of the massive oil spill in the Gulf of Mexico could be more investment in the oil sands, which would in turn boost Canada's economy, economists say. New restrictions on deep sea drilling, and whatever regulations come into force in future, could prompt the view Alberta's oil riches are a "safer" alternative," Toronto-Dominion Bank economist Dina Cover said in a research note today. She cited the fact that offshore projects are projected to account for just 3 per cent of total output in Canada by 2025, while the oil sands are forecast to represent more than 80 per cent.

"Still, the notion that oil sands are a safer method of oil production, plus the fact that production costs may become lower than offshore costs once new regulations kick in, could attract more investment into the industry, helping to boost the Canadian economy. Moreover, lower potential output in the U.S. eases the risk of a regulatory ban on oil from Canada's oil sands, and could lead to increased oil exports to the U.S."

In a separate report today, CIBC World Markets economists noted in a report today that the oil sands are already on track to become the biggest single source of oil imports to the United States this year. "The Deepwater Horizon disaster has also focused attention on the oil sands' 170-billion [barrels] of economically recoverable reserves," said Peter Buchanan and Meny Grauman. "The [U.S. Department of Energy]expects the Obama administration's recent drilling moratorium to cut U.S. production by an average 70,000 [barrels a day]next year, which is equal to only about 1 per cent of current OPEC spare capacity."

Dollar could also benefit, RBC says The series of events that could be sparked by the environmental disaster could also give the Canadian dollar added life, RBC Dominion Securities says.

"Extraction from the Canadian oil sands continues to grow and with crude oil prices back above $70 (U.S.) a barrel, new greenfield projects and previously shelved expansions are once again starting to become viable," wrote senior currency strategist Matthew Strauss. "Also, as public and government appetite for deepwater offshore drilling ebbs, interest in onshore, safer oil extraction operations is set to increase. [The Canadian dollar's]petro status will continue to grow in coming years, but the positive [foreign exchange]impact of Canada's vast oil resources could be felt much earlier in the form of renewed foreign interest that could well translate into another round of multi-billion [mergers and acquisitions] inflows."


Foreign investors grab up Canadian bonds After a one month dip, foreign investors are loving Canadian bonds again, largely federal and provincial debt. Global investors snapped up a net $10-billion in Canadian bonds in April, Statistics Canada said today, with most of the action in government paper. "Investment activity in April focused on federal and provincial government bonds, as non-residents acquired an unprecedented $6.2-billion of Canadian dollar-denominated federal bonds on secondary markets," the federal statistics gathering agency said. "Foreign purchases of provincial bonds were the largest in a year at $3.5-billion, mainly new issues denominated in U.S. dollars."

"It seems investors, who are often heard touting the merits of Canada's relative fiscal health and commodity-sector growth prospects, are putting their money where their mouth is," BMO Nesbitt Burns economist Robert Kavcic said before the Statistics Canada report.

Related: Loonie's star keeps getting brighter

How the economy is shifting Statistics Canada's composite leading index measuring the economic outlook rose 0.9 per cent in May, which Credit Suisse likened this morning to the "Energizer Bunny." However, today's reading shows how Canada's economy is shifting: "The upturn in the index a year ago was led by housing and the stock market. These components have stopped contributing to growth, replaced instead by the manufacturing components ... The housing index fell 1.2 per cent, its first decline since April 2009. Existing home sales continued to retreat slowly from their record high reached over the winter, while the year-long rally in housing starts stalled. Despite the slowdown in housing, furniture and appliance sales continued to strengthen. Demand for other durable goods remained soft, notably for autos."

Gold pushes new heights The price of gold continues to push higher this morning, hitting a record in both London and New York in the $1,260 (U.S.) an ounce range. "Risk appetite has continued to improve over the past few days with equity markets, the euro and the pound continuing to trade near their recent highs," said CMC Markets analyst Michael Hewson. "However, despite this investors are continuing to push gold back to record highs against the U.S. dollar, which suggests that despite this return in the appetite for risk, there is a significant element of caution within the market, as capital also gets rotated into safer haven types of asset, over fears about further monetary stimulus programs and economic contagion."

Tembec shares on the rise Shares of Tembec Inc. surged today after the forest products company issued its latest quarterly forecast. Montreal-based Tembec said in a statement that it expects earnings before non-recurring items, interest, income taxes, depreciation, amortization and other non-operating expenses and revenues in the range of $47-million to $53-million in the third quarter, up from $32-million in the most recent quarter.

Priest develops iPad app Call it the iMass. A priest in Italy, already known for an iPhone application, has now developed an app for the iPad that would give priests the ability to celebrate Mass using the popular tablet computer from Apple Inc. , rather than the traditional missal. Rev. Paolo Padrini, who consults for the Vatican's Pontifical Council for Social Communications, said today the app will be available next month in several languages, The Associated Press reports from Rome. The app will hold the entire Roman missal, he said.

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