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Conservatives made ‘major mistake’ in approach to euro crisis, Paul Martin says

May 28, 2010; Kingston, Ontario Former Canadian Prime Minister Paul Martin received an honorary Doctorate of Law degree from Queen's University during this year's annual spring convocation. Photographed here at Summerhill, Queen's University campus.

Harrison Smith/The Globe and Mail

Paul Martin is registering his disapproval of the Harper government's approach to Europe's debt crisis.

Speaking Sunday on CTV's Question Period, the former Liberal prime minister and finance minister said the Conservatives have made a "major mistake" in how they have characterized the debate over whether Canada should contribute money to an International Monetary Fund effort to backstop troubled states, suggesting that the behaviour and comments of some top officials are weakening multilateralism.

A central point of contention at the Group of 20 leaders' summit in Los Cabos, Mexico, last week was the degree to which those outside Europe are pledging for the IMF as the Washington-based lender takes a key role in trying to contain the debt crisis.

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Canada and the United States both said before the summit that they would not contribute, arguing that wealthy European states like Germany and France have the means to fix the problems themselves.

In Canada's case, many members of the government have used particularly derisive language in arguing Europeans should not get a cent of Canadian tax dollars, with one MP saying Canada should not have to help bail out "sumptuous Euro welfare-state countries and the wealthy bankers that lend to them."

"The major mistake that the government has made is the way that it's characterized this," Mr. Martin said.

"The role of the G20 is to strengthen the financial institutions and the other global institutions that exist. And so, for Canada to turn its back on the IMF when the IMF is saying 'we want more money, not simply for Europe, we want to be able to deal with the huge imbalances that exist around the world,' I think that was a mistake."

Mr. Martin, credited as one of the main architects of the G20 – which in the past few years has supplanted the Group of Seven as the premier forum for addressing international economic issues – went further.

"The second thing," he continued, "is that when you've got China, India, the United States, Europe and Canada and the others at the table, you're going to have differences. But if you want to make globalization work, what you have to do is put a little bit of water in your wine. You have to be prepared to be pragmatic. And for Canada to consistently say, 'we want you people to be pragmatic, we want you people to compromise, but if we don't get our way we're going to take our ball and go home,' I'll tell you, that's just not going to work."

The hectoring rhetoric of some government MPs has toned down a bit since the G20 summit, with top officials including Prime Minister Stephen Harper and Finance Minister Jim Flaherty praising European leaders' commitment to move toward a banking union and to inject money into fragile Spanish banks.

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"In Europe, we're seeing some progress, the move to put some money into the Spanish banks was a good one," Mr. Flaherty said Sunday on CTV's Question Period. "We just finished the G20 meetings in Los Cabos. Certainly, in my discussions with my colleagues, there's a willingness to do what needs to be done. Now they need to take the political action. That's difficult."

Last Thursday, Bank of Canada Governor Mark Carney told an audience in Halifax that it would be a mistake to "underestimate" the resolve of Europe's policy makers to stem the crisis. However, he and government officials continue to also urge Europe to move more swiftly toward mapping out some type of fiscal union, which Germany has largely resisted as Europe's strongest economy and amid little voter enthusiasm for using their money to help struggling neighbours.

More immediately, Mr. Flaherty said, is the need for European officials to put enough resources into at-risk banks, so the crisis doesn't get worse and spread to banks in healthier regions.

"We've been encouraging the Europeans, strongly, to address the capitalization needs of the banks, because that's where we could get a contagion affecting other European banks, then American banks, then Canadian banks," he said, adding that absent a worsening crisis he is "confident" in Canada's economy.

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About the Author
Economics/business writer

Jeremy has covered Canadian and international economics at The Globe and Mail since late 2009. More

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