Flaherty says country still in recession

Mon May 25, 2009 12:09pm EDT
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By Louise Egan

MEECH LAKE, Quebec (Reuters) - Finance Minister Jim Flaherty said on Monday the economy was showing positive signs but warned against early predictions of recovery, saying the country was still in recession.

"There are some good signals in the economy but I think we have to be cautious. We are still in the midst of a recession, a fairly deep recession," Flaherty told reporters prior to a full-day meeting with provincial finance ministers at Meech Lake, Quebec.

Recent Canadian data has shown encouraging evidence of recovery, most recently with Friday's retail sales report for March, which showed the a third straight monthly increase.

One of the first items on the agenda for the meeting was a closed-door briefing by Bank of Canada Governor Mark Carney on the state of the economy.

Provincial ministers are expected to press Ottawa for reforms to employment insurance -- a short-term need to help the jobless through the recession -- and the longer-term goal of improving pension systems.

Moments after Flaherty spoke, the Conservative government announced a C$500 million expansion of its employment insurance program but rejected demands from opposition parties to relax eligibility rules. Liberal leader Michael Ignatieff has threatened a non-confidence vote over the issue.

Flaherty explained the government's refusal to introduce laxer eligibility rules by saying the so-called automatic stabilizers in the system already results in more benefits being paid out in tough economic times.

"EI becomes larger in times of economic slowdown ... There is substantially more money being spent on EI in Ontario because of the increased unemployment," he said.   Continued...