Canada fiscal outlook prompts election talk

Thu Nov 27, 2008 5:19pm EST
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By Louise Egan

OTTAWA (Reuters) - The Canadian economy has slipped into recession and the federal coffers are on the verge of running dry for the first time in 13 years, the government said on Thursday in a report that raised the prospect of an early election.

Even so, the government forecast that the budget would show a tiny surplus in the next fiscal year, a surprise after it prepared the country for the possibility of renewed deficits.

The grim economic outlook unveiled in the annual economic and fiscal update was almost overshadowed by the politically explosive news that Ottawa proposed ending subsidies to political parties.

All three opposition parties rejected the report, saying it contained no real plan to combat the economic crisis. Some slammed the minority Conservative government for postponing a fiscal stimulus package and emergency aid to the auto sector.

"We will vote against this plan. ... (It) does not address the economic slowdown," said Stephane Dion, leader of the Liberals, the official opposition party.

If all three opposition parties vote against the package, the government would be defeated only a few weeks after it was returned to power in an October 14 federal election.

A senior member of the left-leaning New Democrats said that although all three opposition were against the plan, there were other options they could explore before an election was called -- a clear reference to a possible three-party coalition government.

Such a coalition would be highly unstable, since the third opposition movement is the separatist Bloc Quebecois, which wants to break Canada apart.   Continued...

<p>Canada's Finance Minister Jim Flaherty delivers the government's fiscal update in the House of Commons on Parliament Hill in Ottawa November 27, 2008. REUTERS/Chris Wattie</p>