09/12/2011 02:46 EDT | Updated 11/12/2011 05:12 EST

Liberals say troubled global economy is no time for $4 B in government cuts

OTTAWA - The federal Liberals say $4 billion in planned spending cuts by Ottawa should be postponed by a year or more until the global economy stabilizes.

John McCallum, the Liberal party's Treasury Board critic and a former bank economist, says it is almost impossible to overstate the gravity of the financial crisis facing Europe.

McCallum says Canadians are not insulated from the threat of another global financial meltdown and that now is not the time to be cutting public-sector jobs and programs.

In McCallum's words, "you're just compounding the situation."

The Conservative government of Prime Minister Stephen Harper rode to a majority mandate in the May general election on a platform of economic stewardship and a swift return to balanced budgets.

In promising to eliminate the deficit by 2014, the Conservatives said they would find $4 billion in annual government savings within three years, starting with their 2012 budget.

Those proposed savings are on top of previously announced belt-tightening, which has already led to controversial cutbacks such as the closure of Coast Guard search-and-rescue centres, weather offices and water-monitoring stations.

The prime minister was forced to quickly reverse the closure of 21 of 23 stations that check water quality in the Far North after the embarrassing cuts at Environment Canada came to light while he was on his annual Arctic tour last month.

And in public remarks to a national meeting of the Conservative caucus last week, Harper expressed concern about ongoing economic fragility and said "circumstances demand that we listen carefully to Canadians and that we be flexible when necessary at the same time."

Some in the business community took that as an early signal the government could back off its aggressive deficit elimination timetable.

McCallum stressed that Liberals are not averse to government cuts and balanced books —"that's still in our DNA," he insisted — but that any cutbacks must be properly timed, transparent and fair.

"In principal, we Liberals are not opposed to expenditure review or cuts. We did it in the mid-90s. We did it in 2005," said McCallum.

"But it has to be done at the right time. And at a time when the economy around the whole world is at risk of another financial crisis or going into recession, that is not the right time to do these cuts."

The Liberal said the Conservatives, rather than cutting public-sector jobs at this time, could "save billions" by putting the replacement of Canada's fighter jet fleet out to tender and by cancelling tough-on-crime measures that will require major prison expansions.

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