OTTAWA — Prime Minister Stephen Harper and his British counterpart, David Cameron, issued gloomy warnings Thursday that the world could be on the cusp of another recession unless key nations adopt some necessary economic measures.
They made their blunt assessments in separate speeches to the Canadian Parliament Thursday evening.
“Without key countries taking systemically appropriate and coordinated economic measures, without resistance to protectionism and acceptance of more flexible exchange rates, without fiscal consolidation [and] without a commitment by governments to cut rising deficits and reduce what are, in some cases, dangerous levels of national indebtedness – without things such as these, we will not avoid a recession,” Mr. Harper said in his speech in the House of Commons.
Both men used stark language to describe the economic consequences that will occur unless world leaders take decisive, but tough action to deal with the debt crisis that threatens to turn economic recovery back into full-scale recession.
“It’s important that we are clear about the facts,” Cameron told MPs and senators packed into the House of Commons.
“We’re not quite staring down the barrel. But the pattern is clear. The recovery out of the recession for the advanced economies will be difficult. Growth in Europe has stalled. Growth in America has stalled.
“The effects of the Japanese earthquake, high oil and food prices have created a drag on growth, but fundamentally, we are still suffering from the aftershocks of the world financial bust and economic collapse in 2008.
“That means families in Britain and Canada are facing a tough time.”
Cameron said that he and Harper share the same analysis about the root cause of the current economic problems and the best way to fix them.
“The world is recovering from a once-in-70-years financial crisis and is suffering from debts not seen in decades. This is not a traditional, cyclical recession. It’s a debt crisis.”
Cameron said using the “usual economic prescriptions — fiscal and monetary levels to stimulate the economy — won’t necessarily work now.
“The economic situation is much more dangerous and the solution for most countries cannot be simply to borrow more.
“A long-term solution must tackle the fundamental problem. We must address the problem of excessive debt. Let me say again, it’s a debt crisis.”
Cameron said countries in the Eurozone — of which Britain is not a member — must move swiftly to show they have the political will to get their debt under control.
Harper’s assessment was just as blunt in a speech he delivered to introduce Cameron to parliamentarians. Harper praised Cameron for showing global leadership on the need to reduce deficits and debt levels — a practice that he said others must embrace or the consequences will be severe.
“Neither of us will be accused of exaggeration if we acknowledge that the most immediate test confronting all of us is to avoid the devastating consequences of a return to global recession,” Harper told the chamber, as Cameron sat nearby.
Unless countries resist trade protectionism, accept more flexible exchange rates, commit to slashing deficits and reduce “dangerous and unsustainable levels of national indebtedness,” the results will be painful, warned Harper.
Harper’s remarks were delivered in the evening after a day during which world stock markets — including the Canada’s benchmark stock index — plunged sharply.
On Thursday, Harper and the leaders of Britain, Australia, Indonesia, Mexico, and the Republic of Korea sent an open letter to French President Nicolas Sarkozy, the current chair of the G20.
They called for strong co-ordinated action at an early-November meeting of G20 leaders in Cannes, France to ensure global economic stability — specifically by reducing debt levels in the Eurozone that are identified in the letter as a significant threat to the world economy.
“For many advanced economies, the path out of the deep and prolonged recession will be difficult,” said the letter.
“We need decisive action to support growth, confidence, and credibility.
“We have not yet mastered the challenges of the crisis. Global imbalances are rising again. External risks to the stability of our banks and our economies are reaching pre-crisis levels. And volatile and high energy prices are hurting our citizens and acting as a drain on world growth.”
In the House of Commons Thursday evening, Cameron was greeted with strong applause from the hundreds of MPs and senators. They had come to the special gathering to hear an address from Cameron — the first of its kind from a British leader to Canada’s Parliament in a decade.
It was Cameron’s second speech of the day — he delivered an address earlier at the United Nations General Assembly in New York before flying to Ottawa.
Once in the nation’s capital, accompanied by Harper, Cameron participated in a wreath-laying ceremony at the National War Memorial.
He also had a private meeting with Harper, during which the two leaders were expected to discuss the military situation in Libya, as well as the troubling signs of global economic turmoil and the European debt crisis.
Cameron was led into the House of Commons by Harper, a close ally of Cameron on the international stage.
Harper’s introductory remarks were both extensive and effusive.
He spoke of how economy and security issues have brought him and Cameron together seven times in the last 16 months — usually at gatherings of world leaders.
Throughout, Cameron’s leadership has been “decisive” and will continue to demand his “firmness of purpose” in the months ahead, said Harper.
On the economy, Cameron sees eye to eye with his fellow Conservative, Harper, who has long been calling on other world leaders to reduce their deficits and debt loads — a commitment they made at the G20 Summit last year in Toronto, which was chaired by Harper.
Cameron’s government, which came to power in May 2010, has launched sweeping austerity measures to get Britain’s burgeoning debt under control.
Harper praised Cameron for making the “difficult fiscal choices confronting the British economy” and for offering “strong guidance” to other G20 nations on how they should follow suit.
“Truly, among our G20 partners, he has been a leader by example,” Harper said of Cameron.
“Prime Minister, here in Canada, we have followed your progress carefully, and I can safely say that where it matters most, your thinking parallels that of our own government.
“To be precise, while deficit reduction is not an end in itself, the G20 fiscal targets agreed in Toronto last year nevertheless remain an essential element for rebuilding the economic health of industrialized nations.”
Earlier in the day, before Cameron’s arrival, interim Liberal leader Bob Rae rejected the notion that an austerity program such as Britain’s is the only key to success.
“I think there’s a growing consensus that austerity on its own is not going to solve this problem,” said Rae, who stressed that fiscal discipline, economic growth, and “healthy revenues” are all important to an economy.
“The problem that some of the European economies are facing, particularly at the moment Greece, is that the size of their debt is so big that it’s very hard to know what austerity measures would actually get them to a point of being able to be in balance.”
NDP foreign affairs critic Paul Dewar said it won’t help Harper if he uses Cameron’s austerity campaign as proof for why his own government should make major cuts.
“Canadians understand the importance of public services,” said Dewar.
“I think Mr. Harper shouldn’t be using Mr. Cameron as a foil to, you know, do his work. And I don’t think that would be accountable, responsible. And I think people would see through it.”
Harper also lauded Cameron for how Britain showed fundamental conviction in recent months as it worked with other NATO allies, such as Canada, to mount a military mission to help Libyan rebels oust that country’s dictator, Moammar Gadhafi.
Harper quoted former British prime minister Harold Macmillan who once said that “the state is made for man, and not man for the state.”
“We also believe that when we help others to be free, it is our own liberty that we also secure,” said Harper.
“Those ancient rights of democracy and the rule of law that our two countries share that are the common aspiration of millions of people around the world. They are, clearly, the aspiration of Libyans themselves.
“Our mutual hope is that they will someday enjoy them in all their fullness.”
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