TORONTO There will be no deficit on his watch, even on a temporary basis, Finance Minister Jim Flaherty said Wednesday.
In responding to the worsening global financial crisis that has slowed economic growth in Canada and elsewhere, “we'll do what we have to do, so long as we remain economically prudent. We're sure not going to run a deficit ... We will maintain a surplus in Canada and we will continue to pay down debt.”
Asked if running even a small deficit would be bad in these difficult times, Mr. Flaherty said flatly: “Yes, it would be.”
Although Canada is not immune from the economic and financial woes triggered by the worsening global credit crisis, Canadian banks remain sound, well-capitalized and effectively regulated, the Finance Minister told a news conference in Toronto.
“We've had a couple of financial institutions in Canada that ran the risk of falling outside the capitalization requirements,” he said.
“We required them, through the Office of the Superintendent of Financial Institutions, to maintain the appropriate capital requirements and to raise capital as necessary, which was done ... months ago,” he said, but would not name the banks.
“We're fortunate in Canada that we're not in a bailout situation, because we have been implementing our measures. ... If we do need to take further steps here, we'll take further steps. We are prepared to do whatever we have to do ... to protect the stability of the financial system.”
Mr. Flaherty welcomed Wednesday's co-ordinated 50-basis-point rate cut by the Bank of Canada and other major central banks around the world and said more such policy co-operation is needed to unclog the seized up credit markets.
“We're a relative rock of stability in this situation. But of course we're vulnerable to spillovers from what's happening elsewhere.”
Mr. Flaherty will meet Friday in Washington with other finance ministers from the G7 industrial countries to discuss further joint measures.
“We need to have liquidity in the market so that banks will lend to each other and know that they can trust each other.”