Canada to U.S.: we need you to fix debt problem

Wed Jun 15, 2011 4:31pm EDT
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By Leah Schnurr

NEW YORK (Reuters) - Canada's strong economic and fiscal track record could go to waste if the United States fails to come up with a credible plan to fix its deficit and debt problem, Finance Minister Jim Flaherty said on Wednesday.

Flaherty took his fiscal discipline message to New York, where he urged the United States to quickly reach a political deal to avoid defaulting on its debt.

"The consequences for the world would be negative" if the United States were to default, Flaherty told Reuters Insider. "It's not what we need, we don't need any more disorderly action in financial markets."

Flaherty said he was not able to give odds on the likelihood of a default when asked. Canada's strong trade and financial linkages to the United States, and its role as a major commodity producer, make it extremely vulnerable to economic troubles south of the border.

U.S. lawmakers are in talks to reach a deficit-cutting deal that would give Congress the political cover to raise the $14.3 trillion debt limit well before August 2, when the Treasury Department has warned it will run out of money to pay the government's bills.

U.S. Federal Reserve Chairman Ben Bernanke warned on Tuesday that failure to lift the government's borrowing limit could risk a potentially disastrous loss of confidence.

Flaherty frequently touts Canada's relatively manageable federal deficit when he goes abroad, but he said that achievement is of little use if it exists in a vacuum. Flaherty said he was troubled by brinkmanship anywhere in the world and that he was concerned by delays in Europe in dealing with the region's sovereign debt crisis.

"It's a detriment to the international system when we have issues that fester and are allowed to get to the brink before they're resolved," Flaherty told reporters following a speech to the Canadian Association of New York.   Continued...

<p>Canadian Finance Minister Jim Flaherty speaks at The International Economic Forum of the Americas conference in Montreal, Quebec, June 7, 2011. REUTERS/Christinne Muschi</p>