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The Associated Press March 16, 2010, 1:10PM ET

Canadian finance chief warns US, others on deficit

Canadian Finance Minister Jim Flaherty says other developed nations, including the United States, should come up with clearer plans on how they are going to get their weighty budget deficits under control.

Flaherty also urged the Group of 20 leading and industrialized countries to step up work on financial reforms head of the annual spring meetings of the International Monetary Fund and the World Bank in Washington D.C.

Flaherty said Greece's debt troubles were a timely reminder both that world leaders need to agree lasting international financial reform and that tackling big deficits is necessary to restore confidence.

"We're obviously concerned about bumps in the road as we move forward with economic recovery from the crisis," Flaherty told reporters in London. "Issues like the situation in Greece are of concern."

"We look forward to other developed nations in the world showing their plans to move out of deficit towards balanced budgets over time," he added.

Britain's budget deficit is expected to reach 12.8 percent of gross domestic product in 2009/10, while the U.S. deficit hit 9.9 percent of GDP last year.

Canada, which currently holds the rotating leadership of the Group of Seven countries, has one of the smaller deficits in the bloc -- 3.5 percent of GDP.

Flaherty says he intends to halve that in two years and return to a balanced budget in four or five years, adding that the current strength of the Canadian dollar against the U.S. dollar is due in part to Canada's relatively strong fiscal situation.

Flaherty said he had discussions with his counterparts in the G-7 and believed all were working to reduce budget deficits.

But British Treasury chief Alistair Darling hit back at European Union calls for more aggressive deficit cuts, saying such moves would risk tipping Britain back into recession.

Britain plans to reduce its deficit from 12.6 percent of gross domestic product in the 2009-2010 fiscal year to 5.7 percent of GDP in 2013-2014 and 4.6 per cent in 2014-15.

Responding to reports that the European Commission will recommend on Wednesday that Britain move more quickly to reduce its ballooning budget deficit, Darling said quicker action would risk "seriously derailing the economy and tipping our economy back into recession."

Flaherty also reiterated that Canada would not back a tax on financial transactions, or variations of that proposals, as part of international discussions on reform of the global financial system.

He also dismissed talks on regulating banks that are "too big to fail," as not useful, saying that all banks should be regulated, regardless of size.

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