October 6, 2008 / 3:12 PM / in 9 years

Canada urges G7 coordination on financial crisis

OTTAWA (Reuters) - Canada wants the Group of Seven industrialized nations to coordinate action on the global financial crisis in such a way that does not harm taxpayers, Prime Minister Stephen Harper said on Monday.

<p>Prime Minister Stephen Harper receives a high-five during a campaign stop at a day-care in Ottawa October 6, 2008. REUTERS/Chris Wattie</p>

Harper, leading in polls in the campaign for the October 14 general election, also repeated that Canada’s banking sector is not in crisis and that he is optimistic about the overall Canadian economy.

Top U.S. officials said on Monday that policymakers around the world must act in “forceful and coordinated ways” to restore stability. G7 finance ministers and central bankers meet this weekend in Washington to discuss the crisis.

“We are prepared at meetings, working with our counterparts in Europe and the United States, to be helpful wherever we can be helpful... The main concern right now is the tightening of credit around the world,” Harper told reporters in Ottawa.

“Our main advice is to obviously encourage coordinated action, to encourage actions that will stabilize the situation without creating a great deal of moral hazard for taxpayers,” he said, without giving details.

U.S. legislators passed a $700 billion bailout package last week, prompting anger from some voters and politicians over what they saw as the wrongful use of taxpayers’ money.

Harper -- who says only his Conservative Party can be trusted to run the Canadian economy -- said that unlike other nations, Canada does not have to bail out major banks.

He then made a remark on preparations for help for banks, if necessary, which spokesman Kory Teneycke later clarified.

“We have other plans, other proposals, if we have to aid the banking system in case there are other problems around the world that affect us,” Harper said.

Asked about this later on the Conservative campaign plane, Teneycke said: “We are not planning any special measures... We are not planning a bailout package.”

Teneycke said Harper’s comments referred to “regular Bank of Canada discussions with the banks”.

Both the government and the central bank have emphasized that Canada’s banks have had limited exposure to the subprime mortgages that have savaged U.S. banks and that the Canadian banks are better capitalized.

Harper’s rivals say he is far too complacent about the damaging effects of the slowdown in the United States, which absorbs more than 75 percent of Canada’s exports.

Statistics released on Monday showed the value of building permits in August plummeted by 13.5 percent from July. A report by Scotiabank forecast a Canadian recession that could last well into 2009.

“Let’s be clear -- the prime minister of Canada isn’t going to go around the country predicting a recession when we’re not in a recession now,” Harper said.

“I remain fundamentally optimistic about the Canadian economy, but optimistic -- as I’ve said from the beginning -- within the framework we’re now living in and that is in a period of economic uncertainty.”

Harper says his government will continue to try to keep taxes and inflation low and maintain a balanced budget. He dismissed the idea of going into deficit to help a slowing economy.

“My resistance to running a deficit would be that history has shown there are no small deficits. Once governments lose fiscal discipline, they lose it entirely,” he said.

“I don’t think it’s necessary to run a deficit ... what’s necessary is to make sure we undertake fiscal measures that are affordable.”

The official opposition Liberals are proposing to introduce a carbon tax to help cut emissions of greenhouse gases blamed for global warming. Harper says the idea is a disaster.

“Canada has, relatively, a very good fiscal position and this is one of the things that gives investors and others around the world confidence in the Canadian economy and I wouldn’t want to do anything to jeopardize that,” he said.

Additional reporting by Randall Palmer; Editing by Peter Galloway

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