October 21, 2011 / 2:48 PM / 6 years ago

Flaherty urges progress on European crisis

OTTAWA (Reuters) - Canadian Finance Minister Jim Flaherty said on Friday he was very concerned about delays in addressing the European debt crisis because it could endanger the global economy, but he remained confident of modest North American growth

<p>Canada's Finance Minister Jim Flaherty speaks during Question Period in the House of Commons on Parliament Hill in Ottawa October 20, 2011. REUTERS/Chris Wattie</p>

“We need to get to the goal and delay is the enemy. All they have to do is look at the markets, look at the bond spreads, look at what is happening to certain countries in the world that are going to have to bear an awful lot of the premium to borrow money, so we need to sort that out and get to a conclusion,” Flaherty told reporters.

The rift between Europe’s two biggest powers -- France and Germany -- has forced leaders to tack on an extra summit to address the region’s debt crisis in the coming week.

France’s push to use more European Central Bank money to fight the euro zone debt crisis ran into strong resistance from Germany and other EU partners on Friday, leaving Paris increasingly isolated before a crucial summit.

They will now meet twice -- on Sunday and Wednesday -- to adopt a comprehensive strategy to fight the crisis that began in Greece, spread to Ireland and Portugal and is now threatening to engulf bigger economies in the 17-nation currency area.

Flaherty said that while the European crisis threatens global economic growth, he remained confident there would be modest growth in North America in the next little while, and he shrugged off an unexpectedly strong rise in Canadian inflation data released on Friday.

Canada’s annual core inflation rate jumped in September to its highest level in nearly three years, causing traders to scale back expectations of a possible central bank interest rate cut this year or next.

Flaherty noted core Canadian inflation remained within the Bank of Canada’s 1 to 3 percent comfort zone despite the September uptick, adding that he is more concerned about growth than inflation.

“It’s within the range. As you know the range is 1 to 3 percent. People forget that the range, the number, is not 2 percent. The mandate of the government, the Bank of Canada, our agreement is between 1 and 3 percent and the Bank is doing a good job on that,” Flaherty said.

“I‘m more concerned quite frankly about growth, economic growth, and I‘m pleased that we are seeing reasonable, moderate economic growth in Canada and some good signs in the United States. I wish I could say that of Europe.”

Flaherty also said he had spoken with Bank of Canada Governor Mark Carney at some length about the review of the central bank’s mandate.

The central bank’s five-year inflation control target is up for renewal by year-end and an announcement is due before then on whether the government and the Bank of Canada will keep it as it is or modify it.

“We are line with each other on this. We’re not talking about a new policy or a new mandate for the Bank of Canada. What we are talking about is being more explicit about what the mandate of the Bank of Canada is,” he told reporters.

The bank targets an annual inflation rate of 2 percent, with a control range of 1 to 3 percent. Unlike the U.S. Federal Reserve, which targets low and stable prices and maximum employment, the Bank of Canada’s only mandate is inflation control.

Writing by Andrea Hopkins; Editing by Jeffrey Hodgson

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