Europe and the G20 leading economies must act decisively and quickly to avoid another full-scale world recession, Prime Minister Stephen Harper warned on Thursday.
Writing on the eve of a meeting in Paris of G20 finance ministers and central bank governors, Harper said each missed opportunity to contain and confront the European debt crisis was growing more and more costly.
We cannot afford any more missed opportunities, Harper said in an op-ed piece in Toronto's Globe and Mail.
The good news is that this crisis can still be contained and reversed. The bad news is that, unless decisive action is urgently taken, our nations will once again be forced to respond to a full-blown global recession, albeit this time without the full arsenal of policy weapons at our disposal.
Finance Minister Jim Flaherty, speaking in Ottawa before departing for the Paris meeting, said he expected the G20 to discuss a Franco-German crisis plan, how big the euro-zone bailout fund should be, and how to deal with Greece.
He said he was confident Europe would finalize an action plan in coming weeks but said action should be swift.
It is critical that Europe deliver on a comprehensive package of measures that will address their sovereign debt and banking issue, he told reporters, noting that the crisis has spillover effects on the investment intentions of Canadian business.
Canada co-chairs a G20 committee on developing growth without disastrous fiscal and trade deficits, and Flaherty said it was Ottawa's role to address head on key factors including inflexible exchange rates.
One of the countries, of course, that has demonstrated limited flexibility with respect to its exchange rate is China. We'll be having discussions about that this weekend, he said. He plans to meet Chinese Finance Minister Xie Xuren in Paris.
Harper hosted last year's Toronto G20 summit, which committed members to deficit reduction, and he has grown increasingly impatient with the slowness in confronting the current financial and economic crisis.
His prescription for Europe is:
- Immediately and decisively overwhelm the sovereign debt and banking system issues
- Carry out commitments to increase the flexibility of the European Financial Stability Fund as quickly as possible
- Implement clear and credible deficit reduction plans
In addition to developing a sustainable growth framework, he said, the G20 should:
- Develop clear and concrete medium-term debt and deficit reduction plans as agreed in Toronto in 2010
- Act meaningfully to boost exchange-rate flexibility
- Unequivocally commit to implement quickly and fully the financial sector reforms agreed in previous summits
- Resist protectionism and advance multilateral trade
The Paris talks are a prelude for a G20 summit that Harper will join next month in Cannes, France.