Canada working with IMF, others to resolve Ireland’s debt problem: Flaherty

TORONTO, Ont. – Canada has been involved in efforts to resolve the Irish government’s debt crisis and there’s been progress towards an orderly resolution, Finance Minister Jim Flaherty said Friday.

Flaherty made the comments as Irish, European and International Monetary Fund officials were negotiating terms of a massive credit line for Ireland. There are reports the discussions could last into December.

Flaherty didn’t disclose Canada’s position on how to resolve the issues.

“Things are progressing in an orderly way and that is what is important,” the finance minister told reporters as he launched his annual pre-budget consultation process in Toronto early Friday.

“Canadians can be reassured that there is an orderliness to this. That is important so we don’t have financial sector disruptions.”

The 2011-2012 federal budget is expected to be tabled in late February or early March.

Flaherty said he has had a number number of discussions with his Irish counterpart and Canada’s director at the IMF, Tom Hockin, has also been engaged actively in discussions about the Irish situation.

“We had discussions as well when we were in Seoul last week with other European finance ministers and other finance ministers in the G7 because we are all concerned that this matter be dealt with in an expeditious way, to avoid consequential problems.”

“And it is being dealt with in an expeditious way.”

Irish, European and International Monetary Fund officials began  tough negotiations Friday over terms of a massive credit line for Ireland’s debt-crippled banks.

The Irish rescue plan is the latest act in Europe’s yearlong drama to prevent mounting debts and deficits from overwhelming the weakest members of the 16-country eurozone. Greece was saved from bankruptcy in May, and analysts say Portugal could be next in line after Ireland for an EU-IMF lifeboat.

Ireland, once the so-called Celtic tiger among European economies, is now among the weakest after a debt fuelled real estate bubble burst and stuck many of the big Irish banks with billions of dollars of worthless loans.

Ireland has been deeply reluctant to accept any EU-IMF bailout, stressing that the state itself has cash reserves sufficient to last until mid-2011. It fears that any EU-IMF offer will come with too many unpalatable conditions.

But Ireland’s hand has been forced by a recent run on deposits at Irish banks, which are already receiving a minimum euro45 billion bailout. The European Central Bank has been stemming deposit losses with short-term loans that have ballooned.

Flaherty was meeting with reporters in Toronto as he began the annual consultation process ahead of the next federal budget.

He repeated the Conservative federal government’s oft-stated position that it’s working to return to a balanced budget after falling into deficit during the 2008-09 economic downturn.

“The Canadian economy is on the right track but the global recovery is fragile,” he said. “This is not the time for risky new spending schemes, that will increase deficits and raise taxes.”

Asked if there would be any new big tax cuts introduced in the next budget, Flaherty said he’d listen to advice during the budget consultation process but “having said that, our intention is to stay the course.”

He said there are a number of previously announced broad-based initiatives to reduce taxes for business that will go into effect on Jan. 1 and reforms to the employment insurance system will be implemented.

Canada built up a “substantial deficit” through the Economic Action Plan announced in early 2009, while the country was in the deepest downturn in decades, but it needs to return to a balanced budget, Flaherty said.

Top Stories

Top Stories

Most Watched Today