OTTAWA (Reuters) - Canadians should not succumb to an atmosphere of “doom and gloom” because of the financial turmoil experienced in the United States over the weekend, Prime Minister Stephen Harper said on Monday.
He was reacting to turmoil surrounding the bankruptcy filing by investment bank Lehman Brothers Holdings Inc and the agreement by brokerage leader Merrill Lynch to be taken over by Bank of America.
“I don’t think now the atmosphere should turn to one of complete doom and gloom,” Harper told a news conference.
“The American economy, while it has slowed down considerably ... has not crashed and has not itself entered into recession either through all of this,” he said. The United States is by far Canada’s largest trading partner.
Harper said that if there were going to be a “big crash or recession” it would have happened by now, more than a year after the U.S. credit crisis started.
“The American economy itself, notwithstanding much deeper troubles than anything we see here, does demonstrate considerable resiliency from time to time, so I wouldn’t throw in the towel on any of this quite yet,” he said.
Canada had a credit crunch in August 2007 involving asset-backed commercial paper but no major institutions have failed, partly because the Canadian housing market did not become as overheated as that in the United States.
“Canada is not in the same situation as the United States. Our household sector, our government sector, our financial institutions have solid economic fundamentals. The Canadian economy’s fundamentals are solid,” said Harper, who is campaigning for the October 14 general election.
Nonetheless, he said he expected a continued period of slower economic growth.
Stephane Dion, head of the official opposition Liberal Party, charged that the Conservative prime minister had presided over an economic performance that was actually worse than that of the United States.
“Stephen Harper has allowed what was a booming economy to hit a brick wall,” he said on the election trail in the Atlantic province of Newfoundland and Labrador.
Dion says Harper’s policies risk putting the federal budget back into deficit, a suggestion Harper rejected.
The Bank of Canada issued a statement at the start of the morning seeking to assure markets that it was closely monitoring global developments and that it would provide liquidity to markets as needed.
By midday it had already injected C$2.305 billion ($2.15 billion) in overnight money into the market to lower interest rates.
Additional reporting by Randall Palmer and Louise Egan; Editing by Peter Galloway