09/27/2011 06:38 EDT | Updated 11/27/2011 05:12 EST

Stephen Harper, Jim Flaherty, Mark Carney To Meet As European Debt Worries Continue


OTTAWA - As worries about the European debt crisis and the tepid U.S. economic recovery threaten to derail Canadian growth, the prime minister said Tuesday the country is taking the right steps.

Stephen Harper huddled with his finance minister and central banker to compare notes with the pair after their meetings with financial policy-makers in Washington on the weekend

"I think we're all finding that people are pretty positive about what we're doing here, but we're in a world picture that is not so positive, and that clearly is going to demand that we spend a little bit of time looking at it," Harper said.

"So we're going to compare some notes."

The meeting between Harper, Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney, comes ahead of a gathering of G20 leaders in France in early November, where they will discuss the global economy.

Earlier in the day, Harper told the House of Commons that Canada is "running a very expansionary fiscal policy right now" as he fended off Opposition criticism that the government is not spending enough to create jobs.

Government critics say Ottawa should spend on infrastructure or make other moves to boost the economy and create work for the 1.4 million Canadians who are unemployed.

"We are obviously undertaking good management, and some modest savings to ensure that as the economy recovers that we will in fact balance our budget and retain our fiscal advantage," Harper said.

But several economists painted a bleak picture of the economy for the Commons Finance committee as it began its pre-budget consultations.

Though the economists did not agree on whether the economy was headed into a double-dip recession or if Ottawa should launch another round of stimulus spending, they all outlined a troubled outlook.

BMO Capital Markets deputy chief economist Doug Porter told the MPs that growth will be very modest at best for this year and next.

"While we continue to believe that Canada and the U.S. will manage to claw out some growth over the next year, it looks to be very modest at best," Porter told the committee.

"Given such subdued growth I would say that it would really only take one more negative shock to basically tip the economy over into an outright downturn."

Porter sided with those who did not believe another round of stimulus spending was needed just yet, but he urged the government to be cautious and flexible.

"In this kind of environment, caution really is the watch word," Porter said.

However the committee also heard calls for spending on infrastructure projects from Sylvain Schetagne, senior economist at the Canadian Labour Congress.

"Public investments remain our last recourse," he said.

Glen Hodgson, chief economist at the Conference Board of Canada, noted that the government should not be afraid of delaying its plan to balance its budget by 2014-15 by a year or two amid the changing global circumstances.

"It's not a matter of staying the course, it is being prepared to make common sense course corrections along the way depending on the needs of the economy," he said.