Finance Minister Joe Oliver fears the turmoil in Ukraine and Iraq is potentially "dangerous" to the global economy, particularly in Europe where he says many countries are not living up to their promises to get their books in line.
Canada's finance minister made the comments on a conference call from Warsaw, Poland, where he is wrapping up a tour of Europe that included stops in London and Berlin.
While the European Union operates under a common monetary policy, Mr. Oliver said the international community is concerned that many individual European states are not delivering on their fiscal policy pledges.
The minister said that will be a point of discussion this fall when finance ministers and then world leaders gather for meetings of the G20.
"A number of the European countries are in difficult fiscal circumstances," he said. "There is a real risk of deflation and the banking system also is more fragile than we would like to see. So that in this kind of environment, additional external shocks can be quite dangerous and the situation in the Ukraine is one and of course the situation in Iraq is another one and there are others."
The comments come as Ukraine and the European Union signed a free-trade deal Friday. Ukraine's decision to align itself with Europe rather than Russia is at the heart of the ongoing tensions between Warsaw and Moscow.
One of the main economic impacts flowing from the situations in Ukraine and Iraq is higher energy prices, which the minister said will translate into higher costs for Canadian consumers. He added that it could also increase revenue for Canadian business and governments, but that is muted by the fact that Canadian crude is often sold at a discount in the U.S. due to the lack of pipeline capacity to reach other global markets.
Mr. Oliver, a former minister of Natural Resources who was a vocal advocate of the Northern Gateway pipeline proposal, was also asked on the call whether this week's Supreme Court ruling on aboriginal rights means the project will not go ahead.
"I wouldn't come to that interpretation," he said. "All I can say is the government of Canada is now taking time to review the decision to determine the next steps. We've said we believe the best way to resolve outstanding aboriginal rights and title claims is through negotiated settlements that balance the interests of all Canadians."
Benjamin Reitzes, vice-president and Senior Economist for BMO Nesbitt Burns, commented Friday on figures showing a decline in Euro Area economic confidence.
"Tensions in Ukraine and higher oil prices are likely weighing on sentiment," said Mr. Reitzes in a research note.