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Eric Reguly, The Globe and Mail: On, um... I do want to ask a couple of questions on the economy if you don't mind. The sense I got on, Wednesday, talking to people, was that the recovery is going to be a little bit slower, maybe a bit delayed than... than the leaders, finance ministers thought a few months ago. Isn't that also your sense?

Prime Minister Stephen Harper: Um, well I have two senses. The first is that the economy is not as bad as it was three or four months ago. I think that's important to say. The signs of the easing of the recession, I think is the best way to put it, are pretty clear. At the same time I think the current judgment is the prospects of a rapid recovery are less certain. It would look like recovery may be somewhat slower. I just caution everyone on all these things, that we've had... you know, not just in Canada but internationally, predictions have been evolving so rapidly that I think we're, you know, we have to be prepared to accept the fact that predictions may well change, again. But certainly it would appear right now that we've established stability, the recession is easing, recovery probably hasn't begun, may begin shortly but may look like it will be a gradual recovery as opposed to a rapid recovery. That would be the current consensus. But that is subject to change, and that's the big if.

Reguly: Do you think 2010 will be as bad economically as 09?

Harper: Well no, that's certainly not...

Reguly: Okay.

Harper: That's certainly not my view. It's not... Nobody... I don't think anybody is suggesting now - I should be cautious when I say here - I don't think... certainly the wide consensus is that the first quarter of this year was the worst of economic performance, and it should be better from here. The question will be, how much better. And, you know, will it be a slower recession, a levelling off, a mild recovery, or a more aggressive recovery? You know, right now I think the balance of opinion toward 2010 is a mild recovery.

Reguly: Okay. If you... Looking back, since the start of the recession, if you had to change one thing about your government's response to the recession, what would it be? I mean, the benefit of hindsight.

Harper: I... I'm not sure we would change all that much. Canada is not responsible for the recession. You know, there is no domestic source of the recession in Canada. I think our response to the global... you know, the global slowdown which we saw as early as late 2007, cutting taxes - both short and long-term - I think was the appropriate response given our fiscal situation. I think delaying any more substantive response - and we did... we also did some assistance to the financial industry in the fall - but delaying stimulus packages until we actually had firm evidence of the recession in Canada I think was wise. I don't think one would have... would have gone on a, you know, a large-scale deficit spending exercise until it was clear the recession was hitting Canada.

Reguly: Do you regret cutting the GST now?

Harper: No, not at all.

Reguly: No?

Harper: No, it's ... First of all, I believe cutting all taxes is good policy, okay? I... I'm of the school that... You know, there's two schools in economics on this, one is that there are some good taxes and the other is that no taxes are good taxes. I'm in the latter category. I don't believe any taxes are good taxes. It's important to remember when we cut the full two points of the GST, the budget was still in surplus. Anyone who says we put the budget in deficit by cutting the GST is wrong. I also think cutting the GST had some important effects. I think it's important to say why it was a good policy, besides fulfilling an electoral commitment to cut the GST, um... besides being a tax cut which as I say is good in and of itself. The problem at the time we cut the second point of GST was making sure we sustained consumer spending during what appeared to be a recession elsewhere. And all the evidence is that that was actually pretty effective, that we sustained consumer spending pretty late in the game. In fact consumer spending didn't drop in Canada until very near the end of 2008. So I think it was good policy. And I also think as well it was fair. I mean part of our tax cut package is to make sure you cut taxes for everyone. The GST is the one tax everybody pays. And cutting the GST, cutting a highly visible tax like the GST, was a strong sign of credibility to the population at large that we were serious about cutting taxes.

Reguly: Good.

Harper: Yeah.

Reguly: Prime Minister, on the industrial side, now that it looks like the worst is over for the auto industry, what industries in Canada do you worry about now? Which ones do you think are going to get in more trouble?

Harper: Um, you know, I'm not sure at this point Eric I would single out any other industry. Obviously there are companies and individual industries that are in trouble, and, you know, I... I think that the governments... you know, at normal times the government's focus should be the overall performance on the economy, less sectoral, and certainly not at the company level. The companies ultimately have to be responsible for their individual performance within a sector. I would just say this. My observation would be that the areas we've seen the greatest job losses over the past couple of years - and some of it as you know was even prior to the recession, in forestry, and then autos and manufacturing writ large - I think these areas will continue to be under pressure because the job losses are not entirely recessionary. It involves a restructuring of the economy. And that's why in our stimulus package when we're, you know, putting money into employment insurance or retraining we're trying to focus as much on... and other investments in the economy, we're trying to focus as much on retraining, restructuring, looking for opportunities, and not simply on bolstering sectors because there will continue to be some pressure in sectors even as the recovery continues.

Reguly: Okay. I want to talk... I'm actually doing an analysis of, sort of, what should the G8 evolve into for tomorrow's paper, and you answered most of the questions. But in Muskoka, where we happen to have a cottage, this is my question... You... You're committed to the G8. You also realize that it has to be a little bit more. In Muskoka will you invite other countries? Will you invite a G5 or a G4 or 6 in?

Harper: We will definitely be doing outreach. We will definitely invite other countries. We haven't decided quite the format of that. We haven't quite decided quite... Because I think there are two issues here. It's not just the G8 outreach, but the interface of the G8 with the G20, which seems to be emerging as the... as a parallel process. So I think we've got to find a way of integrating all of this, but integrating in a way that's workable and effective.

Reguly: Okay. Do you have any preliminary thoughts on...

Harper: No we haven't.

Reguly: ...on how you...

Harper: I... I've... I can just say this, I talked to the president of South Korea, President Lee. I have written him before and I've talked to him here about, you know, how we can better coordinate our discussions and efforts so we're not doing a lot of duplication. I think there is, as I say, room for the G8 and the necessity of an expanded body as well.

Reguly: Okay.

Harper: That I'm clear on. And I think there should... What I would say is this, my preliminary thought is I think there should only be two, not...

Reguly: What you mean two?

Harper: Well as I said, we had... we had five or six formats at this... at this meeting and the G20 wasn't even one of them. So I think we need to narrow this down to, you know, a couple of formats - the G8 and a more inclusive global format.

Reguly: That was my next question Prime Minister. I was going to ask you what... from watching this process over the last few days, what do you think... not about what was accomplished or not, but just the process. What do you think worked and didn't work, and what lessons are you taking away from this for Muskoka?

Harper: I mean, there's all kinds of little things I won't get into...

Reguly: Okay.

Harper: ... you know, that you notice about the structure of meetings or whatever. Look, the trade off on all of these things is on international meetings there's a trade-off between inclusiveness and dialogue. The more exclusive a meeting, the more frank and intimate the exchanges. The broader the meeting, the more difficult that becomes, the more it becomes the reading of pre-scripted speeches; each one reads their text and moves on. And that's the trade-off.

Reguly: Okay.

Harper: Which is why I think it's, you know, if we have a broader body we need to maintain the G8 in some form. In terms of the more general... The Italians used - and I won't go into detail - the Italians used less structured, less formal kind of atmosphere, which I actually think was... was useful in some ways. Let me just give you an example. At other functions I've been at, on every single arrival there was a set order of arrival, and everyone arrived one at a time. This made an arrival that should have taken 20 minutes take, you know, an hour and a half. I actually think the Italians are on to something here, that you can get the same effect without having it excessively structured. So, you know, I think there were... While I know the Italians have been criticized for some lack of structure, I think getting away from the really tight scripting of everything can be useful on occasion.

Reguly: Gotcha. Okay. So can I ask you... Just the last question on the G8 then I have one question on CO2. Can I assume that next... in Muskoka it's going to be a little bit smaller than this in the sense that, you know, you're not going to have...

Harper: Well, in the end... in the end here we had 28 heads of government...

Reguly: Yeah.

Harper: ... and I counted at least 12 international institutions.

Reguly: Yeah. So let's say 40.

Harper: 40.

Reguly: Yeah.

Harper: There's no way I see ours being larger than that (laughs). Let's put it that way. Okay?

Reguly: Okay. On CO2, it's such a complicated file. My question is this, can Canada meet its CO2 reduction commitments in the broadest sense? I don't know if that's a Copenhagen Accord or whatever it is, and... while allowing the oil sands to expand at the rate they have been expanding?

Harper: Well first of all, Canada under my administration will only take on commitments we can fulfill. And that's an important thing to say. And... But it's also important to say that that commitment has to involve real reduction in greenhouse gas emissions. You know, there will have to be, even in the interim period, some actual verifiable reduction. The short answer to the question is yes. A realistic commitment is consistent with... with growth in the oil sands. Oil sands growth is not the only source of our carbon dioxide emissions, or even the growth of our emissions. But obviously, you know, addressing some of the issues in the oil sands are going to... is going to have to be part of the solution.

Reguly: Would you consider creating a fund, the technology fund... I know you're doing the carbon capture and storage, but a separate fund for other technologies?

Harper: Now are we talking domestically, internationally, what?

Reguly: Domestically.

Harper: Domestically.

Reguly: Yeah. Aside from the CCS.

Harper: Well we've... we have a range of... We have a range of funding for technology. There is a... There is a green technology fund... There is a clean technology fund and a green fund. Both can fund technology. Neither are exclusive to carbon capture and storage, although carbon capture and storage is a big focus, and will be a big focus of Canada. But we're already putting, you know, all kinds of money into tidal power, not to mention money we're putting through AECL and the development of the next generation nuclear reactor. So we're... You know, Canada will continue to make significant investments into energy technology. As I've said, you know, our... we are an energy superpower, our goal is to be a clean energy superpower. And I believe that given Canada's... I believe two things. First of all, given Canada's natural resource endowment in energy, plus... combined with our, you know, with our history of allowing market forces to reign in the economic field, which has made our industry very robust generally, that I think we should aim to be a leading provider of energy no matter what form that energy is and no matter what technology develops it. I think it would be a real problem if we... for this country if we became a laggard in the energy business.

Reguly: No prime minister lasts forever. What would your... What would you like your legacy to be?

Harper: Oh it's ... it's too soon to ask me that.

Reguly: (laughs) Okay.

Harper: My... Way too soon. My... You know, obviously my preoccupation right now is to make sure that we get Canada through this difficult economic period, minimizing the impact on our citizens and making sure that we get through it in a way while helping people and helping sectors, do not cause long-term structural damage to the economy. In fact, that we make sure we continue to preserve the relative strengths we have had going into this - strong financial regulation, strong fiscal situation. We hope to come out of it with a better tax system. And certainly in relative terms we have a big opportunity to come out with a relatively much better tax burden than other countries. And to make sure... you know, yes, there are things we have to do to help people that are in... and stimulate the economy that are short term in focus. But we've got to make sure that we make the investments in people, the investments in technology that are wise in the longer term. So that's my... That is my principal focus right now, that we will, you know, as I say, we will continue to be least affected by this recession but come out of it in much better shape than others. That is my... That is my preoccupation. That occupies... You know, to be honest, that probably occupies 90 per cent of all our policy work these days, is essentially work with that kind of focus, one way or another. It's... It's an all-encompassing priority.

Reguly: You should... On the tax front, you should do what the Italians do, make tax that is... paying your taxes optional. (laughs)

Harper: It has its benefits and its downsides.

Reguly: Where are you going for your holidays this year?

Harper: I'm going to stay in... I usually spend most of my free time at Harrington Lake. The taxpayers provide me with a beautiful cottage and summer property so we... we vacation within the country.

Reguly: I loved your quote on Berlusconi. That was hilarious. Best quote I heard all week.

Harper: (laughs) Well I won't say more.

Reguly: (laughs) Totally true.

Harper: Yeah.

Reguly: Great. Prime Minister, lovely to meet you, finally after all these years. Okay. Bye-bye.

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