U.S. budget crisis threat to Canada’s economy, Flaherty says
Posted Nov 7, 2012 7:12 pm.
This article is more than 5 years old.
OTTAWA – The White House and Congress must ease gridlock in Washington over a potential fiscal crisis or risk sinking back into recession that would ultimately also hurt Canada, Finance Minister Jim Flaherty said Wednesday.
Newly re-elected President Barack Obama will soon confront a face-off over the “fiscal cliff” — which would be become reality if no deal is reached over a string of tax and spending cuts due to kick in at the end of the year.
Flaherty said the White House and Congress must agree on how to cut the budget deficit in the next 60 day or risk a recession.
“The effect on U.S. GDP, according to the Americans themselves, would be four to five per cent, which would put the U.S. economy into recession quite quickly and the Canadian economy would follow shortly thereafter,” Flaherty said.
But with the re-election of Obama, the Republican-dominated House and a Democrat-led Senate, a divided Washington is stirring fears that both the U.S. and Canada will plunge into recession.
“We’re all concerned that it’s an immediate problem within the next 60 days that needs to be dealt with,” Flaherty said, referring to G20 leaders.
Stocks closed with the worst one-day loss of the year Wednesday. The Dow industrials plunged more than 300 points at one point before recovering slightly.
