21 may 2010
Actually, analysts don’t think the Greek crisis will be as dramatic this time, though they warn that the assurances of a few weeks ago that North America needn’t worry about it are not so true now.
“When you think of the direct linkages, you understand that it’s all manageable – Europe represents less than 9% of our total exports,” – Porter said.
“On the other hand, Europe is an important part of the global economy and global financial markets, so it’s going to influence Canada through the financial market and commodity price channel”.
There are two ways of damage. If Europe provides strict measures to rein in deficits, it can slow the global growth and undercut commodity prices. And if Europe doesn’t do it – financial markets can resist and freeze credit possibility. In the end, it will still put the global economy at risk.
Today markets are not so sure about Mark Carney raising interest rates in two weeks. What was before the 100% probability – now is just about 50/50 of overnight rate hike on June 1st. Many economists suggesting that it would be wiser for Carney to wait until at least July 20 (next scheduled Bank of Canada meeting)
Jim Flaherty, Finance Minister, says Canada is still among the most economically stable countries in the world.
The federal deficit is about 3.1% of GDP (in some European countries it’s 12-13%). And the national debt is 35% of GDP (in Europe it’s 100% and more).
Canada is doing really well – better than in the early 1990s, when the Wall Street Journal compared loonie to “Canadian peso”.
“Canadian recovery is even beyond expectation … especially compared to global sovereign debt worries blowing up all over the place,” he says.
It doesn’t mean Canada won’t be affected by Europe, however. But second downturn won’t be as bad in Canada, analysts say.
Porter doesn’t see any signs of a second-dip slump in Canada (or the U.S.), but a second recession is now possible in Europe.