12/22/2011 07:51 EST | Updated 02/21/2012 05:12 EST

Canada Could Pay Into IMF Europe Fund, Flaherty Says


Finance Minister Jim Flaherty says Ottawa would be open to paying into a bailout fund for Europe administered by the International Monetary Fund — as long as it was supported by the other G20 countries.

"There's some sense around the world that if at the end of the day we have to provide some help somehow, that we would not turn a blind eye to it because of the world consequences of the collapse of the eurozone," Flaherty said Thursday on CBC-TV's Power & Politics with Evan Solomon.

"If at the end of the day all of the other G20 countries were going to provide more resources to the IMF, and let the IMF deal with part of the situation in Europe, then I think there would be support for that overall, because of the fear, quite frankly, around the world of a global economic crisis."

Prime Minister Stephen Harper had previously said the federal government was unwilling to use Canadian funds to bail out European countries troubled by the ongoing debt crisis, saying that Europe had sufficient resources to cope while the IMF should be focused on developing countries.

Flaherty also stipulated Thursday that EU countries must "commit most of the resources" to a shore up the eurozone's financial system.

"And they haven't done that yet," he said, despite the fact that the eurozone is "on the brink of a very serious crisis."

G20 leaders met in France last month, where they pledged to rebalance the global economy and boost resources available to the IMF. But they delivered few details on how the group of countries might help resolve the debt crisis.

Italy and Spain have been at the centre of concerns in recent months as their borrowing costs have risen. Those two are considered too big to bail out with the current eurozone bailout funds, in contrast to Greece, Ireland and Portugal, which have all sought outside financial help. Italy, for example, has some 1.9 trillion euros in outstanding debt.

To help steady the eurozone's financial system, the European Central Bank has loaned 489 billion euros to 523 banks over the past three years — the largest infusion of credit to European banks in the 13-year history of the shared euro currency.

The ECB is trying to make sure that banks have enough ready cash so they can keep on lending to businesses. Otherwise, a credit crunch could choke off growth and spread the debt crisis to the wider economy through the banks.

To deal with the crisis, Flaherty said that EU countries "need to build a firewall around the contagious banks."

In addition, he said the IMF should "go in and make sure that those countries that need to balance their budgets [and] get over their huge debt problems are properly supervised, so that the world can be assured that they're actually doing it."