Today's Coming Crisis Movie

Friday, July 29, 2011

Debt crisis has Canada on alert

Finance Minister Jim Flaherty said Tuesday he is "very concerned" about the debt crisis in the United States, warning Canada would feel an impact if Washington defaulted on its loans.

But Flaherty also said he believes U.S. legislators will reach an agreement allowing Washington to raise its debt ceiling before the Aug. 2 deadline.

"I'm relatively confident that the United States will arrive at a debt-ceiling solution in the next few days," Flaherty told a news conference at the upscale Paletta Park Mansion in Burlington, Ont.

"This is very important," said the minister, who was in Burlington to host a roundtable with representatives of small business.

The concern is that U.S. legislators might not agree on raising the amount of debt the country is able to take on before next week's deadline. Default by the government of the world's largest economy would send shock waves through global financial markets.

Flaherty warned such a development could lead to higher interest rates, even as credit became less available for Canada and other countries.

Flaherty said he is consulting regularly with U.S. Treasury Secretary Timothy Geithner on the matter.

"I know that they are fully cognizant of the consequences of failing to arrive at some sort of agreement," he said.

Flaherty also stressed, however, U.S. lawmakers need to reach a deal that will also solve that country's long-term debt woes.

"It matters that the United States work toward a plan to have their fiscal house in order," he said.

"That matters for all of us, including Canada." (more)