Fiscal report prompts election talk

Fri Nov 28, 2008 1:54pm EST
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By Louise Egan

OTTAWA (Reuters) - The 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.

In his annual economic and fiscal update, Finance Minister Jim Flaherty appeared to focus more on restraint and balancing budgets in the face of a global recession, bumping the idea of fiscal stimulus further down on the government's agenda.

Among the few measures aimed at softening the impact of the global market meltdown, Flaherty proposed expanded powers for the government to support banks hit by the crisis, including capital injections by the government, as well as some temporary relief for pensioners and private pension-fund providers.

The statement stunned opposition parties, which slammed Ottawa for failing to produce a plan to combat the crisis or to extend emergency aid to the auto sector. They also denounced what they called "ideological" moves such as plans to end some subsidies to political parties and to suspend the right to strike by public-sector employees.

"This is no way to govern when you're on the edge of Niagara Falls. So go back and think about it again," said Michael Ignatieff, a Liberal legislator.

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

None of the opposition parties has the money to fight an election now. That suggests they could also lean on Harper to amend the fiscal update or arrange for enough legislators to stay away from the vote so that the Conservatives would prevail.   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>