WASHINGTON - Canada is urgently calling on Europe to "overwhelm" their problems with a massive bailout of their big banks as a necessary first step to prevent a new recession barely two years after the last one.
Finance Minister Jim Flaherty ended the first of two days of meetings with his G20 counterparts in Washington devoted to the growing crisis, pretty much as he began them, expressing frustration with European leaders.
The European representatives at the international meetings have said they are prepared to go ahead with a June 21 emergency fund to deal with the debt crisis and are prepared to be "flexible" as to its size, but cautioned that not all in the 17-nation eurozone club have approved the proposal.
Flaherty said he shared the "frustration" with the slowness of the process, and urged Europe to get on with it.
He called on them to announce a facility similar to the near trillion dollar bailout Washington put in place at the end of 2008 to save their banks from going the way of Lehman Brothers.
"This problem in Europe needs to be overwhelmed as the Americans overwhelmed their problem," he told reporters.
"And they need to overwhelm the problem in order to get ahead of the markets. They have procedural concerns, that doesn't change the reality that the sooner the better, that uncertainty and delay are the enemies."
Bank of Canada governor Mark Carney added the problem is manageable "if it is managed."
"It is not a question of ability for the eurozone, it's a question of political will."
A crisis atmosphere has built around the two days of meetings as markets, expecting strong action, have expressed despair over doubts that leaders will seize the moment as they did in 2008.
Some ministers have given Europe six weeks to fix the problem. That would coincide with the next leaders summit of the large G20 nations, the pre-eminent decision making group in the world that played such a pivotal role in the October 2008 crisis.
The head of Europe's central bank, Jean-Claude Trichet, said leaders were "fighting hard" in Europe but that it takes time to get everyone on board.
And French finance minister François Baroin suggested Europe may be open to expanding the size of its $600-billion 21 emergency fund agreed to on June 21, but not as yet ratified.
But it's an open question whether financial markets are willing to wait that long.
On Friday, the Toronto stock market fell nearly 100 points, taking the index 7.5 per cent lower on the week and 20 per cent below its highs in early March.
New York fared a little better, gaining back about 38 points, slim consolation for the more than 700 points it lost the previous two days.
Flaherty and Carney both were grim faced at their news conference despite trying to make the case that Canada, while not wholly sheltered, still remained relatively well off.
The finance minister said he still expected modest growth going forward, but also stressed he was prepared to act if the worst came to pass.
"If the global situation deteriorates, we'll be pragmatic and we have the flexibility to adapt," he said.
Flexibility is code work for Canada's relatively strong fiscal position, which allows the government to introduce a second stimulus package without breaking the bank. As the IMF noted this week, Canada is one of the few big economies in the advanced world that can afford to stimulate the economy through higher spending.
The minister did not say whether his four-year plan to balance the budget is still on track, although that would fall by the boards if the economy continues to slide.
Much of that will depend on Europe, but other reforms are needed, Flaherty said. One of the most important is the need for indebted nations to carry through with austerity and big exporting nations such as China to allow their currency to appreciate.
On Thursday, Prime Minister Stephen Harper made it clear the stakes of dealing with the deepening crisis swirling around Europe's sovereign debt, headed by the growing possibility of a Greek default.
"We're now at a stage where the uncertainty in global markets is getting to extremely dangerous levels and simply more steps is not what is going to resolve the problem," he said.
"I know that the solutions will be extremely difficult but I think we're at the stage where the solutions and the outcomes that the market and people fear are far worse than what would actually occur if some final decisions were made."
British finance minister George Osborne said the eurozone must take action before the upcoming G20 leader's summit in November.
The concern is that if Greece cannot meet its interest payments, it will set off a chain reaction of contagion, first to European banks that hold Greek bonds and then around the world to financial institutions connected to Europe. That would freeze credit and hammer the real-world economy, much as happened in 2008 when Lehman Brothers' collapse led to a financial and then economic crisis.
"It's about making sure than banks can actually finance the economy," said International Monetary Fund manager Christine Lagarde.
Earlier in the day, Flaherty spoke as if leaders are looking beyond Greece itself to the impact it would have on European banks in an effort to prevent the contagion from spreading, as happened with the Lehman Brothers collapse in 2008.
Asked about newspaper reports that Greece is considering asking bondholders to accept a 50 per cent haircut on its debt obligations, Flaherty stressed that contagion was the bigger problem.
"I think it's pretty clear to everyone that Greece is in a very difficult position in terms of paying off its debts. The key is the knock-on effects on European banks and making sure that contagion is controlled," he responded.
G20 finance ministers pledged Thursday night that they are "committed to a strong and co-ordinated international response to address the renewed challenges facing the global economy."