December 12, 2008 / 6:13 PM / in 9 years

Harper meets with Ignatieff on budget

OTTAWA (Reuters) - Prime Minister Stephen Harper on Friday held his first meeting with the main opposition party’s new leader, who is threatening to help bring down the minority Conservative government unless it delivers a stimulus-rich budget next month.

<p>Canada's Prime Minister Stephen Harper takes part in a caucus meeting on Parliament Hill in Ottawa December 10, 2008. REUTERS/Chris Wattie</p>

Michael Ignatieff on Wednesday took over as head of the Liberals, the official opposition, and said he was prepared if necessary to vote with other parties to defeat Harper over the budget, due on January 27.

“It was a businesslike meeting. They talked about the economy and the upcoming budget. Mr. Ignatieff made it clear ... that the ball is in Harper’s camp. It’s up to him to put up a credible economic plan,” said a Liberal spokesman. Harper’s chief spokesman did not respond to a request for comment.

The opposition parties last week signed a coalition deal to bring down the government as soon as they could but signs are emerging that tensions might be easing.

Finance Minister Jim Flaherty said earlier that he would hold talks on the budget with senior Liberals on Monday.

The Liberals indicated doubts about the usefulness of such a meeting, saying they wanted Flaherty to produce accurate details about the economy. He presented a fiscal update last month that many economists dismissed as unrealistic.

“I am prepared to listen to the views of the coalition,” Flaherty said during a televised news conference in Saint John, New Brunswick.

The opposition parties says the budget should contain major stimulus measures, an approach the government says it backs, and boost spending on infrastructure projects.

“It’s quite clear that infrastructure is a very good way to stimulate the economy. ... We can invest more in infrastructure but it needs to be fast,” said Flaherty, repeating that Ottawa planned to spend C$6 billion on infrastructure projects next year.

The Liberals are unhappy with November’s fiscal update, which forecast that Ottawa would stay in the black for the next five years if it did not take any stimulus measures.

The government’s forecast contradicted those of many economists and Parliament’s own budgetary officer, who see deficits of various sizes.

“We are prepared to have a constructive discussion if he is prepared to provide Canadians and ourselves with honest fiscal numbers,” said Liberal finance spokesman Scott Brison.

“It’s very difficult to develop honest solutions unless you’re being honest about the nature of the fiscal situation. ... You can’t build a real stimulus package based on a false fiscal framework,” Brison said.

Flaherty told the Saint John Board of Trade that 2009 would test Canada in unprecedented ways.

He says he is prepared to let Ottawa go into deficit, temporarily, to tackle the crisis.

Dale Orr, chief economist at the Global Insight research firm, said stimulus measures should have been taken months ago to stave off the worst of the recession.

“After the end of 2009, fiscal stimulus will probably no longer be appropriate, and by the end of 2010, it may well be adding unwanted inflationary pressures,” Orr said.

“Accelerating small infrastructure projects is the best way to provide fiscal stimulus that is temporary, timely, targeted, and cost-effective.”

($1=$1.24 Canadian)

Reporting by David Ljunggren; Editing by Frank McGurty

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