Bloomberg News

Canada’s Murray Says More Coordinated Policy Needed in Recovery

November 30, 2011

Nov. 29 (Bloomberg) -- Bank of Canada Deputy Governor John Murray said coordinated action between developed and emerging economies may be the best, and perhaps last, way to put the global economy on a path to sustainable growth.

“A little help from your friends might be all you have left,” Murray said. “Second-best strategies for staying out of trouble, such as keeping your own house in order, may now have to give way to third-best coordination strategies.”

Major economies are struggling to revive growth after cutting interest rates close to zero and incurring budget deficits, Murray, 63, said in the text of a speech he’s giving in Plattsburgh, New York. Emerging economies are also unwilling to abandon policies that have helped them in the past, including keeping inflexible exchange rates, he said.

Canada helped lead talks among Group of 20 countries that led to joint commitments for adopting more flexible currencies and cutting deficits, moves that Murray said are the best course for promoting growth. Currency policy is the area where there has been the least progress, he said.

“Regrettably, it is movement on the exchange rate front and the correction of external imbalances that are proceeding at the most glacial pace,” he said. “A way must be found to break this log-jam to everyone’s advantage.”

Europe Crisis

Europe’s debt crisis and “strong, sustainable growth” worldwide are the two biggest challenges, and they are related, he said.

“Fiscal and banking problems are not going to be solved by deleveraging alone,” he said. “It will also be necessary to expand the size of the global pie in a more evenly distributed manner if long-run stability is to be achieved.”

The Ottawa-based central bank has done a simulation that shows the cost of failing to implement reforms, Murray said. Without China adopting a flexible exchange rate and without the U.S., Europe and Japan addressing their budget deficits, could cut 8 percent from world gross domestic product by 2017, worth $7 trillion, he said, adding “it could well be much worse.”

--Editors: Paul Badertscher, Kevin Costelloe

To contact the reporters on this story: Theophilos Argitis in Plattsburgh, New York at; Greg Quinn in Ottawa at

To contact the editors responsible for this story: Christopher Wellisz at; David Scanlan at

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