15 June 2009

Flaherty sees U.S. deficit as biggest threat to recovery

The following is excerpted from the 13 June 2009 edition of “globeandmail.com”.

The biggest risk to Canada's economic recovery is not the rising dollar or climbing oil prices, but the burgeoning U.S. deficit, Finance Minister Jim Flaherty said at the close of the Group of Eight finance ministers meeting.

Although Canada is showing signs of renewed economic life and better consumer confidence, Mr. Flaherty said “I worry about the slowness of the recovery in the U.S. I worry about the size of the U.S. deficit, which is approaching US$2-trillion this year.” …

The finance ministers of the world's eight largest economies said they were generally more bullish about widespread recovery than they were even a few months ago, as stimulus spending kicks in, though they warned that unemployment could still climb because of the lag effect….

Mr. Flaherty said he fears that any failure to rein in the U.S. deficit could trigger a credit downgrade, which in turn would force interest rates up and delay both the American and Canadian recoveries. …