Monday, June 11, 2012

Germany should be annoyed with Canada's refusal to contribute to bailout fund

By Bill Curry, Globe and Mail, June 7, 2012
Germany is expressing its irritation with Canada for refusing to contribute to an international bailout fund as Prime Minister Stephen Harper faces increased pressure from the G20 to show “solidarity” with countries tackling Europe’s financial crisis.
Canada is on track to be one of the few G20 nations not offering a specific amount to the International Monetary Fund as it tries to raise at least $430-billion to draw on in case any members need a financial rescue.

But Mr. Harper isn’t budging as he carves out an agenda directly opposite to those of the high-debt governments of Europe. He chose Davos earlier this year to announce a long-term economic plan that includes raising the eligibility age for Old Age Security, partly to contrast Canada with the generous but unaffordable entitlement programs that are partly to blame for the trouble in Europe.
Ottawa insists the IMF exists to help the world’s developing countries, not Europe, and Canada takes the position that it is standing up for non-G20 countries that are uncomfortable with IMF funds going to the euro zone.
The Prime Minister’s stand isn’t likely to make him popular at this month’s G20 summit in Los Cabos, where the Mexican hosts are making the collection of new contributions a key priority for the meeting. The G20 leaders meet on June 18, just one day after an election in Greece that will have important consequences for the stability of the European Union.
The European economy is in a particularly sensitive phase due to both the uncertainty surrounding Greece’s future and rising concern over the health of Spain’s banking system.
Almost all G20 members – with the exception of Canada and the United States – have said they will announce specific pledges in Los Cabos, and some amounts have been reported already. Japan, for instance, is expected to offer $60-billion, Saudi Arabia $15-billion and Australia $7-billion.
Germany, the strongest economy in the EU, is expressing concern over Canada’s repeated assertions that its taxpayers should not “bail out” Europe.
In an interview with The Globe and Mail, Germany’s ambassador to Canada, Georg Witschel, said Canada should realize that the entire global economy will be at risk if the European economy falters.
“We find it indeed somewhat irritating and somewhat disappointing that Canada is so adamantly refusing to help,” he said. “A major problem in the euro zone would have major negative economic repercussions on Canada, so solidarity is needed. … We still hope that Canada would be ready to contribute more, like so many other partners.”
Yet this pressure on Canada appears to be having no effect. Finance Minister Jim Flaherty used strong language in Ottawa on Thursday to dismiss calls from NDP Leader Thomas Mulcair for Canada to contribute.
“What we do know is that Mr. Mulcair criticizes our government for not participating with Canadian taxpayers’ money in bailing out European banks and, quite frankly, these are among the wealthiest countries in the world and they can manage their own issue before looking to other countries to bail them out,” Mr. Flaherty said.
Fiscally "austere," and globally "tone deaf"....highlighting the narrow, provincial and self-satisfied Canadian position of non-involvement in what is really a global problem...humph!
Of course, there will have to be belt-tightening in the European countries who need a bailout. And, of course, those same countries will be unlikely and unwilling to purchase as much Canadian goods, when they recover, given the Canadian government's refusal to budge on this issue.
Why should they? When they were in deep need, the Canadian government, on behalf of all Canadians, turned  its back on a contribution to signify solidarity with the G20. I guess, it is only when Canada hosts the world body that it is interested in putting on a great "show" with gazebo's and faux lakes and gestapo-like security.
And this from Editorial, Globe and Mail, June 8, 2012
As much as it has been relatively isolated from global economic turmoil thus far, Canada will not be immune from the contagion if entire governments or banking sectors collapse. That's especially the case now that the threat has expanded beyond Greece and other small economies to much larger ones, most notably Spain.

Mr. Harper has a constructive role to play in advocating stronger austerity measures, particularly amidst uneven responses from European leaders unnerved by pushback from their electorates, as he did during his overseas travels this week. But his advice won't find much traction if he is seen to be indifferent to the very real risks those countries face, and to the argument that in some cases tough budgetary measures will be easier to undertake if governments know there will be backup financial support if needed.
With most other G20 countries (save for the United States) pledging specific dollar amounts as the IMF tries to build up an emergency lending reserve, Mr. Harper should also consider how his disinclination to engage could affect his international policy aims. As Canada seeks to establish a free-trade agreement with the European Union, it need not bend over backward to curry favour. But neither is it helpful to express borderline contempt for the plight of EU member countries, while alienating even the likes of Germany, as appears to be happening.
With the credibility derived from its strong fiscal position, Canada has an opportunity to help ensure that any relief plans are suitably cautious and well-considered – that good money is not thrown after bad. Better that than simply treating Europe's situation as someone else's problem, when it could soon be our own as well.

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