September 2, 2010 / 5:57 PM / 7 years ago

Harper eyes move to deficit reduction

TORONTO (Reuters) -Prime Minister Stephen Harper said on Thursday he is wary of the U.S. economic situation but that his government still plans to stop implementing extraordinary economic stimulus measures early next year so that it can turn to taming its budget deficit.

Harper, speaking to reporters in Kitchener, Ontario, after a funding announcement, said the government’s main priority in the autumn would continue to be the economy.

He said that Canada has seen considerable economic improvements in the past 1-1/2 years, but added that “we are still not quite where we want to be”.

He said he was concerned about the tenuous recovery in the United States, which is by far Canada’s largest trading partner.

“We are watching that with some degree of unease,” he said.

Still, Harper pointed to job growth in Canada’s private sector, the relative strength of the financial system, and to rising domestic interest rates, as signs that the time is right to start making the transition away from stimulus spending.

He reiterated that the government would turn off the stimulus taps in March.

“We will transition, obviously, to a greater emphasis on deficit reduction, but we’ll continue to watch things very carefully.”

Parliament returns from its summer break on September 20. Harper said the government’s other priorities would include reforming the criminal justice system and domestic security.

A poll released on Thursday showed Harper’s Conservatives neck and neck with the Liberals, the biggest opposition party.

At the start of the summer the Conservatives, who have only a minority of seats in Parliament and need support from at least one other party to stay in power, held an 11-point lead over the Liberals.

Harper said he hopes an election “is not in the immediate future because I think we should be focusing on the economy.”

Reporting by John McCrank; editing by Peter Galloway

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