Flaherty pledges to cut budget gap, urges G20 to do same

Wed Aug 10, 2011 4:49pm EDT
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By David Ljunggren

WAKEFIELD, Quebec (Reuters) - Finance Minister Jim Flaherty pledged on Wednesday to stick to his strict budget deficit reduction plans and urged other major countries to do the same, saying the current market turmoil was caused by excess debt.

"This is a government problem. Governments have to get their fiscal houses in order," Flaherty told reporters.

Stock markets are unhappy with the increasing debt loads of the United States and some euro zone nations and do not like the seeming lack of political will to tackle the problems.

Flaherty said the Group of 20 major and emerging nations had to stick to a unanimous pledge they made at a G20 summit in Toronto last year to halve their budget deficits by 2013 and eliminate them by 2016.

"This will cause some pain, no question, but it's absolutely essential that this be done," he said before a two-day summer policy retreat in Wakefield, Quebec.

"The follow-through is that countries that have unacceptable deficit and debt situations will act to correct those situations and certainly seek to have the support of their populations."

Flaherty said Canada was performing well relative to other countries, noting it had recorded seven consecutive quarters of growth. But he added that global economic uncertainty "poses obvious risks for Canada", given its reliance on trade.

The Conservative government -- which was re-elected with a majority in May -- says it will stick to its plan to eliminate the budget deficit by 2014-15, in part by finding ways to save C$4 billion a year in spending.   Continued...

<p>Finance Minister Jim Flaherty leaves a news conference during a financial policy retreat in Wakefield, Quebec near Ottawa August 10, 2011. REUTERS/Blair Gable</p>