OTTAWA (Reuters) - The euro zone should craft a plan for greater integration rather than lurching from crisis to crisis with stopgap measures because the global economy is running out of time to correct itself, Canadian Prime Minister Stephen Harper said on Tuesday.
If the European debt crisis deepens and affects the global banking system, Canada has contingency measures in place that include providing Bank of Canada liquidity to commercial banks, as it did in the 2008-09 crisis, Harper said in an interview with CBC television in London.
“I do think in a sense, here, I don’t want to sound too alarmist, but we are kind of running out of runway here. And in terms of structure of the euro zone and in terms of addressing these problems, we do need to see a broader game plan,” Harper said, according to a transcript obtained by Reuters.
Harper’s pressure on his European counterparts aligns Ottawa with Washington, which also emphasized the need for fiscal and financial union in Europe on Tuesday following an emergency conference call by finance ministers and central bank governors of the Group of Seven advanced economies.
Policymakers are on high alert after Spain said its banking crisis has affected its ability to borrow in financial markets.
Harper credited Europe for avoiding a Lehman Brothers-like catastrophe so far, but said four years into the crisis short-term measures were no longer acceptable.
“We just can’t say, ‘Let’s wait until the Greek election.’ We cannot have a Greek election determining the future of the global economy, that’s not fair to anybody,” he said.
Canada has little direct exposure to the troubled European sovereign funds and banks, but is “exposed to others that are exposed to others” and may need to take emergency action to keep credit flowing if things worsen, he said.
“We do have contingencies in place to minimize the impact on us as we did in ‘08-‘09,” he said. “There are various things that can be done certainly by the Bank of Canada and the financial sector to preserve the health and liquidity of the Canadian financial system.”
Asked what investment advice he would give to Canadians worried about their retirement savings amid the financial turmoil, Harper said: “Don’t cut and run.”
“Be in markets and places where the business is good, where the long-term prospects are solid, and focus on that. Things will go up and down in the short term, they always do.”
Harper called for a serious examination of the shortcomings of the euro zone institutions for fiscal policy, monetary policy and financial regulation.
“In a time of crisis to sustain the euro they have to do a much bigger job of integration than they have done until this point,” he said. “The alternative will be that it will come apart one country at a time. And that will be very bad for everybody.”
Reporting by Randall Palmer and Louise Egan. Editing by Peter Galloway and Christopher Wilson