DAVOS, Switzerland – Canada’s plea to its international counterparts to open their wallets and spend their way out of a worsening global economic slump is resonating among the world’s economic power brokers.
At a time when some countries are looking at austerity to help them pull through a shaky economy, Canadian cabinet ministers have been telling anyone they meet at the annual meeting of the World Economic Forum that deficits are the way out of the downturn.
“Interest rates are at historic lows. We can make significant investments because we have that, plus an opportunity with our low amount of debt, especially in comparison with other countries,” Finance Minister Bill Morneau said Thursday.
“What I hear from other people in my position around the world is this is the right initiative at this time, and we know it will make a difference for Canadians.”
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The Liberals promised not to run a deficit of greater than $10 billion this year and next, part of an infrastructure spending program designed to kick-start the Canadian economy. The government has suggested that’s now a goal rather than a limit, raising the possibility of a deeper deficit.
Some countries, particularly in Europe, don’t have the fiscal room to take on more debt, said author and journalist Fareed Zakaria, who interviewed Justin Trudeau after the prime minister’s keynote speech on Wednesday.
“More western governments should be spending more. There should be less austerity. There is the reality of debt burdens in some of these European countries, which make that much harder to do, but for North America, no question,” he said.
Canadian business titan Michael Sabia said countries have become too dependent on monetary policy and need to put in place a much broader growth strategy and “focus on the real economy.”
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That focus, he said, has been lost because of upheaval in the markets. Stock values are dropping, along with the price of oil and the loonie, together spooking some observers into pressing the federal Liberals to respond.
The Liberals are trying to expedite billions in infrastructure dollars allocated to previously approved projects that have yet to receive federal dollars. They are also looking for shovel-ready projects to fund to push more dollars out the door of the federal treasury.
“We need to look through the current turbulence of the markets,” Sabia said. “That’s the issue of the moment, (but) it’s not the issue.”