Debt management is the order of the day for Ottawa and for the governments of Europe according to Finance minister Jim Flaherty, who on Friday repeated his warnings about the "dire" situation in the Eurozone and the need for belt-tightening at home.
Despite some recent and rosier numbers in the Canadian financial picture, and calls from some corners for more stimulus spending, Flaherty said that the government must instead continue to get spending under control and reduce its debt -- the same advice he has been giving all Canadians.
Flaherty said programs or initiatives that do nothing for the economy must be cut in order to reduce the deficit -- though he stopped short of naming specific programs or indicating where Ottawa might be looking to make cuts.
"By sticking to our target of eliminating the deficit in the medium term and finding savings within government operations, we will follow through on our pledge to Canadians, while focusing on what truly matters: jobs and growth," he said during a speech to the Canadian Club in Toronto.
He added that a "significant number of Canadians" have been paying down their household debt and in particular, mortgage debt, in line with the warnings he and Bank of Canada governor Mark Carney have been sounding for months.
Flaherty will next month start consultations for his 2012 federal budget. He wants to hear ideas from Canadians about how to create jobs while keeping taxes low.
His remarks came as the government reported it is on pace to beat its budget deficit target of $32.3 billion for this fiscal year, thanks to higher-than-expected tax revenues.
Federal revenues were up $4.3 billion, or 3.9 per cent, in the first half of the year, almost all from taxes of individual Canadians. Corporate tax revenues rose about $900 million, but revenues from the GST fell $1.4 billion.
The Conference Board of Canada earlier in the day declared in a report that the country's economy is fundamentally sound and predicted further expansion barring a European meltdown. The Ottawa think-tank's latest analysis of provincial economies says the economy will expand by 2.4 per cent next year and 3.3 per cent in 2013 -- above the consensus of most economists.
Flaherty agreed during an appearance on CTV's Power Play that the economy will see "modest growth," but added Canada must protect itself against the possibility of another downturn.
"We have to strike a balance. If we get hit by another global shock ... we have to be flexible and take steps that might be necessary to preserve economic growth and job creation," he said.
"The lesson of Greece, Spain and Portugal is how essential it is for countries not to rack up debt, and to get back to balanced budgets."
Also on Friday, the U.S. rating agency Standard & Poor's cut Belgium's credit rating from AA+ to AA because of its long-running political stalemate -- seemingly underscoring Flaherty's warnings about the danger of "political inaction."
It is "quite possible" that Europe has slipped into a recession, he added, though more definite data will not be available for some months.
With files from Canadian Press
