VANCOUVER (Reuters) - Finance Minister Jim Flaherty on Sunday renewed his call for Europe and its banks to create a “firewall” around the Greek debt crisis to keep it from spreading internationally.
Europe needs to remember the lessons of the U.S. subprime mortgage crisis that exploded into an international credit crunch because it was not contained quickly, Flaherty told CTV’s “Question Period” program.
“We’ve learned, I hope, from recent history the need to act and contain a firewall around the problem and then we can carry on with the recovery that we have,” Flaherty said.
Flaherty has warned European officials repeatedly in recent weeks about the need to act quickly on the debt issue, and Bank of Canada Governor Mark Carney last week also called for a so-called financial firewall.
Flaherty also renewed the government’s concern about Canadians’ personal debt levels on residential mortgages, saying people should not be lulled into a false sense of security about interest rates in the long term.
“The debt-to-asset ratio of Canadians is OK, but we are cautioning people not to assume too much long-term debt on the assumption interest rates stay as low as they are because they won‘t,” Flaherty said.
The Bank of Canada’s next rate decision is scheduled for July 19, although Carney hinted in an interview last week that the central bank may need to keep the rate low as the economy faces a substantial headwind.