SASKATOON, Saskatchewan (Reuters) - A Canadian government led by the left-leaning New Democratic Party would erase the deficit within four years and clarify laws on foreign takeovers, offering investors a new degree of predictability, party leader Jack Layton said on Thursday.
Speaking to Reuters in an interview during the final campaigning days before the May 2 election, Layton also said he opposes a takeover bid for TMX Group by the London Stock Exchange and believes the Canadian economy is too fragile to withstand interest rate hikes.
Spending projections from the party, which has catapulted to an unexpected second place in opinion polls, were nothing for financial markets to worry about, he said.
“We’re very confident in the fiscal projections that we’ve made - they’re quite conservative,” Layton said. “(The deficit target) is in ink all right, and I signed it.”
The NDP promises C$69 billion ($73 billion) in new spending over four years and says it will eliminate the deficit over that period as higher corporate taxes and an ambitious job creation program bring in new revenues.
Some investment analysts have said greater clout for the NDP could bring uncertainty on fiscal issues, and Conservative Prime Minister Stephen Harper warned on Thursday that the NDP platform would destroy jobs.
Layton dismissed that. “It’s a modest adjustment of priorities at the margins of the federal spending envelope, but it can have important impacts on people’s lives,” he said.
The NDP has never governed Canada at the federal level. But pollsters say it could win almost 100 seats in this election, based on current opinion poll numbers.
That would make it the second largest party in the Canadian Parliament. If the Conservatives can’t win enough support from other parties to stay in power, Layton could have a chance of forming a government with backing from the Liberals, who started the election campaign in second place but faded badly.
Layton said Canada needed to do more to clarify a test that says foreign takeovers must be a net benefit of Canada, a debate that came into focus last year when the Conservative government rejected a $39-billion takeover bid by Australia’s BHP Billiton for Potash Corp of Saskatchewan.
Investors and many politicians don’t understand what the net benefit test is, Layton said.
“Rather than these ad-hoc flare-ups, we’d be better to put in place procedures and definitions that would give certainty,” he said.
He said he saw too many downsides to approve LSE’s bid $3 billion for TMX Group, which owns Canada’s major stock exchange -- a deal that needs to be approved by both the Canadian and Ontario governments.
“We worry that Canadian business trying to access capital might have greater difficulty. As much as one might want to pretend that nothing will change, we find that hard to believe,” he said.
“We think the current structure makes the most sense for Canada, so someone would have to do a lot of persuading.”
Challenging the role of the fiercely independent Bank of Canada -- and stepping into territory where politicians rarely venture -- Layton said higher Canadian interest rates could slow job creation at a time of high unemployment.
“For now would you like to see the Bank of Canada hold off on interest rate hikes?,” Reuters asked.
“Yes,” Layton replied.
He added: “I‘m also concerned about the level of personal indebtedness of Canadians. And anything that would have an impact on the interest they’re having to carry is a challenge for families too.”
He noted that a strong Canadian dollar is putting pressure on Canadian exporters, but he would not say whether he thinks the currency is too high.
“We just have to be very careful and use the fact that the dollar is so high as a signal that we probably need some strategic industrial policies around our value-added industries,” he said.
Layton would not say how long he might give a Conservative minority government before trying to form an NDP government.
“What I’ve always done in politics is reach out in a practical way ... and say here’s what we’d like to accomplish. I’ll adopt the same strategy with whatever mandate I‘m given.”
Editing by Janet Guttsman