Flaherty briefs provincial ministers on economy in call, not full meeting

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OTTAWA — Finance Minister Jim Flaherty is urging provinces to stay the course on plans to eliminate the deficit, telling his colleagues at a conference call Wednesday that the economy remains fragile and vulnerable to shocks.

The federal minister held a conference call with his provincial and territorial counterparts at noon Wednesday in lieu of a formal meeting.

In a statement, Flaherty said the purpose of the call was to brief his counterparts on last month's G20 summit in Mexico and on the European situation.

``There's no doubt the European crisis will have an impact on Canada _ despite our relatively strong economic performance in recent years _ if not effectively dealt with,'' the minister said in a statement after the meeting.

``I recognized my counterparts for their work in controlling expenditures and reducing their deficits, while reinforcing the need for all governments in Canada to maintain that focus. We see the lesson in Europe if public finances are not sustainable and budgets are not balanced.''

According to insiders, the call was short _ lasting just over half an hour _ though Quebec Finance Minister Raymond Bachand said it covered a lot of ground, from the international financial situation to the upcoming federal-provincial conference.

``We're all preoccupied with the situation in Europe,'' he said. ``In spite of the fact that the decision in Greece was good for the banking system, not everything has been resolved. Greece has important problems, Spain is not out of the woods, the market is somewhat nervous about Italy.''

He said the federal-provincial conference in the fall would be focused on the economy.

Nova Scotia Finance Minister Maureen MacDonald, the newest member to the club, said she agreed it was important for governments to control their finances.

``We need to continue to be cautious, and we need to continue to put our own fiscal houses in order because they will give us some advantage if things unravel,'' she said in an interview.

For her part, MacDonald said her province was on a path to balancing its books in the short term. Others, particularly Ontario, are at least six years away from the goal.

Ottawa is slated to eliminate its deficit in 2015-16, but economists believe that could be achieved a year sooner if there is no economic setback.

It was the second year in a row the federal-provincial finance ministers did not hold a formal face-to-face meeting during the summer recess period, as had become a practice.

The ministers will continue to meet in December, however.

MacDonald said the provincial ministers will get together later in the summer as a precursor to the December meeting. While unanimity in unlikely, she said many provinces are facing similar challenges over rising health care costs and slow economic growth.

Last December, a gathering in Victoria ended on a contentious note after Ottawa imposed a new health funding formula against the objections of many provinces. The new formula ties increases in federal transfers for health care to the growth of the economy plus inflation, an amount which is expected to be less than the six per cent annual increments provinces had been receiving.

Geographic location: OTTAWA, Canada, Europe Greece Mexico Quebec Spain Italy Nova Scotia Ontario Victoria

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