TORONTO (Reuters) - Canada stepped up pressure on Europe on Monday to swiftly resolve the Greek debt crisis, warning that failure to do so could harm even Canada’s relatively healthy banking sector.
In the strongest sign yet that Europe’s partners are increasingly jittery about a possible Greek default, Canadian Finance Minister Jim Flaherty said finance ministers and central bankers from the Group of Seven advanced economies discussed these concerns in a call overnight and suggested there could be further G7 talks on Monday.
“The key I think, and our message, is that delay is not desirable,” Flaherty told reporters in Toronto.
After two days of crisis meetings, euro zone finance ministers gave Greece two weeks from Monday to approve stricter austerity measures in return for another 12 billion euros in emergency loans.
The Greek government, parliament and broader society must approve a new package of spending cuts, tax hikes and privatization measures in order to receive the next tranche of aid from the European Union and the International Monetary Fund and avoid a default, they said.
Flaherty, the most veteran G7 finance minister, spoke in a speech earlier on Monday of “some more discussions today about the European fiscal situation directly in Greece but also the risk of contagion from that.”
“There is a real danger of contagion stemming from the situation in Europe, and we know that delay causes more difficulties, makes the situation more expensive and creates more strife at the end of the day,” he said.
Canadian banks, ranked as the world’s soundest by the World Economic Forum, have relatively minor exposure to peripheral European debt, but Flaherty reminded Canadians that even they had not been immune to the global financial crisis.
“There can be a contagion effect which can create difficulties in the banking sector, which is not desirable,” he said when asked what impact a Greek default would have on Canada.
Flaherty stressed in his speech that economies were clearly interrelated and the global situation remained fragile.
“As developments in Europe illustrate, significant financial risks remain. We have to face up to these challenges that are found elsewhere,” he said.
Writing by Randall Palmer and Louise Egan; Editing by Jeffrey Hodgson