OTTAWA/SHANGHAI (Reuters) - Top Canadian officials warned on Tuesday that the global economic recovery is in a fragile state, as they stepped up their push against a global bank tax with speeches in China, India and the United States.
The campaign included a speech by Finance Minister Jim Flaherty in Mumbai in which he warned that economies battered by the global downturn remain at risk.
“We need to be very conscious that we have been through a very difficult time, and the difficult time is not yet clearly behind us,” the Canadian minister told a business group in India’s financial capital.
“The recovery that we have seen in those countries that went through a recession, including Canada, is a fragile recovery. There are indications of recovery, but no clear indications of an entrenched recovery.”
Flaherty reiterated Canada’s opposition to a global bank tax, urging his Group of 20 partners to drop talk of a the idea so they could focus on what he called the main issue of financial sector reform -- capital and leverage standards.
“Quite frankly (the bank tax) it’s an idea that is not going to obtain the kind of universal support that perhaps some thought it would obtain,” he later told reporters on a conference call.
He said proposals for a levy on banks to offset future crises was a distraction that was slowing much-needed reforms that the G20 has promised to adopt by the end of this year.
Canada will host the meeting of G20 leaders in Toronto next month and at least one country, Germany, has said it will renew its push for a bank levy at that venue.
In the lead up to the event, Flaherty and other Canadian ministers have taken on European and U.S. counterparts over the bank tax issue. Canada has argued its banks did not need bailouts during the financial crisis and so should not be punished with a new tax.
Flaherty said that India, which is also a member of the G20, shares that position.
“There are a number of countries in the G20 that are of the view that whatever has been proposed has to take into account individual country circumstances,” he told reporters in India following the speech.
“India is one of the countries in which the financial system, the financial institutions, functioned well. Like Canada, they do not see the need for an ex-ante bank tax,” he said.
Flaherty, the longest serving finance minister in the Group of Seven wealthy nations, said June’s G20 summit would include discussions on euro zone debt, but that he did not expect new proposals or agreements on financial sector reform.
But Canada’s Stockwell Day, president of the Treasury Board, told Reuters in Shanghai that Ottawa would encourage other G20 members to look at ideas for regulating the amount of contingent capital financial institutions must have on hand before they lend.
Separately, Flaherty reiterated Canada’s long-held stance on wanting more flexibility in Asian currencies, saying that was needed for a sustainable growth framework, and that the issue would be raised in June.
With additional writing by Jeffrey Hodgson in Toronto; editing by Rob Wilson