October 4, 2011 / 3:08 AM / in 6 years

G20 not setting Greek emergency measures: Flaherty

OTTAWA (Reuters) - The Group of 20 nations is discussing Greece’s ability to deal with its debt but is not preparing emergency measures in case the struggling nation defaults, Canadian Finance Minister Jim Flaherty said on Tuesday.

<p>Canada's Finance Minister Jim Flaherty speaks to journalists in the foyer of the House of Commons on Parliament Hill in Ottawa September 22, 2011. REUTERS/Chris Wattie</p>

Flaherty once again urged his European colleagues to take decisive action on the euro zone’s debt problems, which continued to send global financial markets tumbling on Tuesday.

The Canadian minister appeared to play down earlier comments from a South Korean official, who said discussions were under way in the Group of 20 rich and developing nations to supply liquidity to the global financial system.

“No, we’re not preparing emergency measures. We’ve had continuing discussions on the issue of Greece’s ability to pay. There are important decisions to be made by the euro zone ministers,” Flaherty told reporters in Ottawa.

A top German official on Tuesday repeated opposition to using the European Central Bank to leverage the European Financial Stability Facility, raising doubts that the bailout fund can be sufficiently scaled up to calm markets.

“We have advocated for flexibility with respect to the size of facility that the euro zone has agreed to create, and we think that’s important in order to have the euro zone in a position where it can overwhelm the situation,” Flaherty said.

“This situation has been evolving since at least January 2010 ... it is time for the euro zone countries to deal with that situation.”

The finance minister said volatility in the Canadian dollar is always a concern, but that its recent slide reflected safe-haven flows to the U.S. dollar and was not surprising.

The Canadian dollar hit a 2011 low against its U.S. counterpart on Tuesday as global markets braced against the prospect of a Greek default and a European banking crisis.

Flaherty also said he thought that Bank of Canada Governor Mark Carney could remain in his current job and also become head of the Financial Stability Board, which has been asked by the G20 to coordinate an overhaul of global banking rules.

Flaherty said he expected modest economic growth “over the next while” and reiterated the Conservative government’s position that it would stick to plans to balance the budget by 2014-15 and was not currently contemplating a second stimulus package to help the economy.

“If there were to be a serious decline then of course we would adjust, we would accommodate, we would be flexible and pragmatic in what we do. We’ve done it before and we’ll do it again,” he said.

Writing by Jeffrey Hodgson and David Ljunggren; editing by Peter Galloway

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