December 15, 2008 / 6:16 PM / in 9 years

Budget talks show signs of political thaw

TORONTO (Reuters) - Canada’s main opposition Liberal Party struck a more conciliatory tone on Monday about co-operating with the Conservative government after legislators from both parties met to address concerns on the state of the country’s finances and fiscal plans.

<p>Finance Minister Jim Flaherty speaks during Question Period in the House of Commons on Parliament Hill in Ottawa December 3, 2008. REUTERS/Chris Wattie</p>

Liberals Scott Brison and John McCallum met in Toronto with Finance Minister Jim Flaherty for about an hour in an exchange they described as “productive and businesslike.” They said they hoped it would be the first of many meetings on the economy before the Conservatives release their budget on January 27.

“All of us understand that Canadians want us to be constructive because Canada, right now, is going through one of the most serious economic difficulties in any of our lifetimes,” said McCallum.

The Liberal legislators said they told Flaherty they want a real look at the books before moving forward, and vowed to maintain pressure on the minority government to move quickly on a realistic economic stimulus package.

The Conservatives’ fiscal update in November was widely criticized by economists for apparently bending over backwards to show balanced budgets in coming years at a time when most experts agree that temporary deficits are a legitimate way to help pull the country through a recession.

It was also panned by the opposition parties, which refused to endorse it, leading Prime Minister Stephen Harper to request Parliament be shut down to January 26, rather than face a confidence vote the minority government was sure to lose.

The defeat would have triggered a new election or opened the door for a coalition of the Liberal and New Democratic parties to form a government.

“The fiscal update said that there was a C$100 million ($81 million) dollar surplus,” said McCallum. “This is a number that nobody believes now, because the growth outlook is far worse -- and there is the asset sale issue -- so in that context, we certainly believe, and Mr Flaherty did not disagree, that the Canadian economy is in deficit for the year coming before taking any fiscal action.”

Flaherty had predicted sales of nonfinancial assets would bring in C$4.3 billion in 2009-10 and C$10 billion over the next five years. He said he expected additional savings to result from a review of all government spending.

The Liberals are demanding a detailed list of assets that will be put on the block. Otherwise, the transactions should be removed from the outlook, they say.

“Before we develop honest stimulus measures, we need to base those numbers on an honest fiscal assessment, and we’re hoping that Mr Flaherty comes back to us with honest fiscal numbers that we can depend on and a real plan around asset sales that we can see, as opposed to taking on blind faith,” said Brison.

After Monday’s meeting, Flaherty said in a statement that the government would have to make some “difficult choices”, but that it would do so only after “an extensive national pre-budget consultation process.”

“We must strive to meet the needs of Canadians, which is why we are listening closely to make our economy and our country stronger at a time when it is clear that the entire world economy is deteriorating,” Flaherty said.

On the government’s plans for fiscal stimulus, the Liberals pressed Flaherty for details on the scale of the package and a timetable.

They also requested updated growth projections, which are based on private sector forecasts, but which they say have been too rosy. They said they were hoping for the information by Friday.

($1=$1.24 Canadian)

Additional reporting by Louise Egan; editing by Rob Wilson

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