Factbox: Key political risks to watch in Canada

Wed Feb 1, 2012 8:03am EST
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OTTAWA (Reuters) - The European debt crisis and the weak state of the U.S. economy are the biggest risks for Canada's governing Conservatives, who are reasonably secure for the next four years after a convincing victory in the May 2011 election.

The government, which says it is determined to cut spending to eliminate its budget deficit, could face angry protests, however, as it tries to change the Old Age Security pension system, which it describes as unsustainable.


Politicians say they are very concerned about the economic problems facing Europe and the United States and fear they could become even more severe in future. Canada's economy is heavily reliant on exports to the United States.

After a surprisingly robust performance through much of 2011, the economy is showing signs of a slowdown as international problems continue and recent data suggests fourth-quarter growth will be sluggish.

The growth of household debt is hitting levels approaching those seen in the United States before the 2008-09 crash, fueled in part by record low interest rates.

Finance Minister Jim Flaherty says Ottawa is watching the housing market closely and is ready to intervene if needed.

The right-of-center Conservative government says its next budget, expected in March, will accelerate plans to cut spending and bring the budget back into surplus by the 2015-16 fiscal year.

One target is the Old Age Security program, a public pension scheme that kicks in at age 65, which the government says is unsustainable and needs to be changed. The announcement triggered opposition accusations that the Conservatives were breaking a campaign promise not to cut seniors' benefits.   Continued...