Canada will run a "substantial" budget deficit in the next fiscal year as it enacts stimulus measures to help shelter the economy from the effects of the global economic downturn, said Finance Minister Jim Flaherty.
He remarked that it was going to be a difficult year globally and that Canada would not escape unharmed as its biggest trading partner, the, was in a "serious recession." The minority Conservative government is preparing its budget, due to be presented on January 27, and has said it is prepared to end a 12-year string of budget surpluses and inject around €12.3 billion to €18.5 billion of stimulus into the economy.
"Canada has certain needs and Canadians have certain needs in this extraordinary time of global recession. To fulfill those needs, we are going to have to run a substantial deficit, which we will do," said Mr Flaherty. The finance minister was speaking to constituents in his electoral district of Whitby, Ontario, which has been hit hard by the fallout of the steep downturn in the auto industry.
In neighbouring Oshawa, Ontario, 50 kilometres east of Toronto, General Motors Corp. plans to lay off 1,200 workers at its car plant by early February. An additional 2,600 workers will lose their jobs when GM shutters its truck plant in Oshawa in May.
Canada and the Ontario provincial government said last month they would provide €2.4 billion in emergency loans to the Canadian arms of Detroit's ailing automakers to keep them operating while they restructure their businesses.
The Conservatives, led by Prime Minister Stephen Harper, need the support of at least one other political party to pass the budget. The official opposition Liberals -angry at what they said was Mr Harper's mishandling of the economic crisis - signed a deal with two other parties last month to bring down the government.
Mr Harper, who won a strengthened electoral mandate in October, escaped being ousted by having Parliament suspended until late January and then promised the budget would include the type of major stimulus measures opposition parties were demanding.
The Liberals have since softened their attacks and few political analysts think Harper will lose power over the budget.
Mr Harper told Maclean's magazine in an interview published on Thursday that Canada was in a strong economic position compared to other countries and should be able to exit the recession relatively quickly.