Finance Minister Jim Flaherty said Thursday he is "worried" about the possibility of another global recession, saying Canada may be able to avoid a major economic slump but it might be too late for Europe.
Flaherty, who is flying to Paris Thursday for G20 finance ministers meetings, told CTV's Canada AM he will be urging his European counterparts to take action -- a message he has been pushing for weeks.
He said European leaders have failed to help Greece emerge from crippling debt and haven't moved to recapitalize the continent's struggling banking institutions -- both of which he said are essential to staving off another recession.
"I'm worried," Flaherty said. "I think (Canada) can avoid that consequence but we may not be able to avoid it in the European context. Our situation is more fiscally steady and stable here in Canada but we have to guard against getting knocked from what happens outside of our country."
Many analysts fear that a Greek credit default could cause other European banks to panic and freeze lending, a move that would send shockwaves through the European economy and likely around the world.
European leaders have said they will have a plan in place within three weeks, when finance minister meet again in Cannes, France.
Flaherty suggested that might not be soon enough. He said he will be calling for strong and immediate action this weekend in France, saying international financial markets are looking for "the exercise of political will, and then decisiveness and clarity."
So far, Flaherty suggested, all three of those characteristics have been absent, noting that German Chancellor Angela Merkel and French President Nicolas Sarkozy came up with a bank recapitalization plan this week, but then refused to divulge details about their agreement.
Flaherty said it's time for action.
"The debt situation in Greece is clearly unsustainable and they need to deal with it and it's also clear the Europeans need to recapitalize their banks. They have the means to do that and we're going to talk about that this weekend."
Flaherty said while his main concern is the economic situation in Europe, Canada's largest trading partner, the U.S., also faces major challenges and needs a "medium term plan to deal with their deficit and debt problems."
