Canada eyes up to C$30 billion in deficit spending

Fri Dec 19, 2008 10:08am EST
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By David Ljunggren and Randall Palmer

OTTAWA (Reuters) - Canada will break a 12-year string of budget surpluses and run a deficit of as much as C$30 billion ($25 billion) next year to kick-start the economy, Prime Minister Stephen Harper says.

Harper, whose Conservatives have long fought against deficits and increases in public spending, told CTV in a year-end interview aired late on Thursday that the deficit would be short term.

"What will be more realistic, in terms of the kind of stimulus our economy will need, is going to be in the C$20 to C$30 billion range," he said. "These are the policies we must adopt under these circumstances."

The higher amount of C$30 billion represents about 2 percent of Canada's economy, a stimulus target urged by the International Monetary Fund after November's Washington summit of the Group of 20 developed and developing nations.

Harper made the remarks three weeks after delivering a fiscal update that his political opponents criticized for being overly rosy in its outlook for the economy, which has fallen into recession along with many others around the world.

The deficit spending will include billions of dollars for infrastructure and public housing construction, tax breaks to fuel consumer spending and training for unemployed workers.

Anger over the fiscal update earlier this month prompted opposition parties to form a coalition that came close to toppling the minority Conservative government.

MIXED SIGNALS?   Continued...

<p>Canada's Prime Minister Stephen Harper speaks during Question Period in the House of Commons on Parliament Hill in Ottawa December 3, 2008. Harper said on Thursday his government could run a deficit of as much as C$30 billion ($25 billion) next year to fund a stimulus package aimed at kick-starting the weakening economy. REUTERS/Chris Wattie</p>