Flaherty says budget reflects fragile economy

Fri Mar 30, 2012 2:46pm EDT
 
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By Claire Sibonney

TORONTO (Reuters) - Canada's Conservative government chose to make only moderate spending cuts in its 2012-13 budget because the global economic recovery is still uncertain and could be shaken by a shock from Europe, Finance Minister Jim Flaherty said on Friday.

"The key here is moderation ... The world economic recovery is fragile. We could have more shocks from Greece and so on, so I think it's important that we act in a moderate way," he told reporters after a speech in Toronto.

The government opted for a slow road to a balanced budget and kept spending cuts relatively mild in a cautious budget on Thursday that also included controversial reforms.

Flaherty also reiterated Canada's position that it does not want the International Monetary Fund to be used to finance Europe's struggles with its debt crisis.

"We think the primary role of the IMF is, and ought to be, supporting the poorer countries in the world. Those countries do not include the European countries, quite frankly, which are among are wealthier countries in the world," he said.

Euro zone finance ministers agreed on Friday to build up their financial firewall to prevent a new flare-up of Europe's sovereign debt crisis, but it was unclear if markets and Europe's G20 partners would see the boost as sufficient. The 17-nation currency area agreed to combine its two rescue funds to make 500 billion euros ($666.85 billion) of new funds available in case of emergency until mid-2013, on top of 200 billion euros already committed to bailouts for Greece, Ireland and Portugal.

(With additional writing by Jeffrey Hodgson and Jennifer Kwan; Editing by Peter Galloway)

 
Finance Minister Jim Flaherty is interviewed following the delivery of the budget on Parliament Hill in Ottawa March 29, 2012. REUTERS/Patrick Doyle