Flaherty urges governments to tackle fiscal woes

Wed May 11, 2011 2:27pm EDT
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By Rachelle Younglai

WASHINGTON (Reuters) - Canada's finance minister warned on Wednesday that countries need to get their fiscal houses in order, saying that markets would act if politicians failed to do so.

Fresh from trouncing left-leaning parties to secure a majority Conservative government in Canada, Jim Flaherty said the 2007-09 financial crisis showed that markets would demonstrate what needs to be done if the governments don't.

"It is important for all of us ... that we have a plan in place to make sure that markets are comfortable and have confidence in the fiscal plan of our governments," Flaherty told reporters on the sidelines of a business conference in Washington.

The Obama administration, Democratic and Republican lawmakers are struggling to come up with a plan to slash the nation's $1.4 trillion deficit and slow the growth of its $14 trillion public debt.

Although the White House has proposed $4 trillion in deficit reduction to be phased in over 12 years or less, there is no firm plan in place and the administration is far from reaching an agreement with lawmakers.

Flaherty, who is planning on meeting with U.S. lawmakers, declined to comment specifically on the U.S. budget fight.

But he said that the recent history of Canada shows that "we can move from time of dramatic deficits ... to a time of stability and solidity with a good plan going forward."

Canada's Conservative government pledged during the election to eliminate the country's budget deficit by 2014-15. Flaherty plans to unveil a budget in June that is largely similar to the one he proposed in March before his government was brought down.   Continued...

<p>Canadian Finance Minister James Flaherty addresses the Washington Conference on the Americas at the State Department in Washington May 11, 2011. REUTERS/Kevin Lamarque</p>