The Bank of Canada governor Mark Carney and Prime Minister Stephen Harper are warning that national debt problems like those affecting Greece are a threat to economic rebound in Canada and around the globe.
Speaking to a Senate committee on Thursday, Carney said although he does not believe that the economic woes of Greece and other southern European countries will lead to another recession, nevertheless, they do have the potential to stall the economy growth we see today.
If global debt-to-GDP ratios are not stopped at levels they are reaching, the world will be afflicted with higher interest rates, a dampening of business and public confidence, and other serious effects, Carney said. ?The debt situation is arguably the largest risk to securing global recovery,? he concluded.
Speaking at a gathering of G20 business groups in Gatineau, Quebec, Harper said the Greek debt crisis serves as a reminder to other governments. ?The Greek crisis reminds us that government borrowing and government debts cannot go on without limit,?
Meanwhile, officials of the European Union and the International Monetary Fund were rushing to complete an agreement with Greece to keep the debt-burdened country from defaulting on its loans. The latest reports say the Greek bailout may require $160 billion over three years. It?s the IMF?s biggest crisis since the Asian financial meltdown of the late 1990s. Fears of a wider emergency have spread along with cuts to the debt ratings of Portugal and the more significant economy of Spain.
As the bailout plans move forward, Canada and other G20 nations are advising Asian economies to loosen their grips on their tightly controlled currencies with hopes of appreciation. Without intervening, any economic gains seen in the Canadian economy could disappear and have no effect in the end.