Harper agrees to premiers' demands for richer EI, massive infrastructure infusion

OTTAWA - Prime Minister Stephen Harper and premiers agreed Friday to an action plan aimed at jumpstarting Canada's flagging economy, including enriched Employment Insurance and massive new investments in infrastructure and job training.

Emerging from a day-long pre-budget meeting with provincial and territorial leaders, Harper said first ministers are in broad agreement on the measures needed to boost the economy.

And he said they all agree on the need to work co-operatively.

"I think all of the premiers understand that we are in a very dangerous time for the world economy - one that requires unprecedented collaboration," he said.

The prime minister did not announce any specific funding commitments, leaving the multibillion-dollar price tag to be disclosed in the Jan. 27 federal budget.

However, he warned that the stimulus measures will force the government to run up "very significant deficits." Federal officials have signalled the economic recovery package could push the country into the red by as much as $40 billion.

Satisfying the provinces may be key to the survival of Harper's minority Conservative government, which still faces a threat by opposition parties to defeat the budget and attempt to form a coalition government.

Several premiers urged the Liberals, NDP and Bloc Quebecois to back off.

"The last thing we need now would be political instability," said Saskatchewan Premier Brad Wall, a strong ally of the Harper government.

"I don't think Canadians would countenance a partisan scrap right now when people are worried about their mortgage, their pensions and their jobs."

B.C.'s Liberal premier, Gordon Campbell, echoed that sentiment.

"It is not time for an election. It is time for us all to put the politics aside and to think first about Canada and the people who live here and think of them as Canadians - not as Canadians who belong to a political party."

Ontario's Dalton McGuinty walked a finer line, saying that while the economy needs political stability, the country must also "uphold the principles of democracy."

But Quebec's Jean Charest, miffed with the prime minister on a number of issues, suggested he doesn't particularly care what happens to the Harper government.

"I'm not going to try to second-guess federal politicians. I'm pretty busy," he said. "They'll have to make up their own minds on what they want to accomplish."

Liberal Leader Michael Ignatieff said he's getting the message "loud and clear" that Canadians don't want political instability on top of economic problems. He said it's still up to Harper to undo the damage his party brought about.

"He's got one way out, which is to produce a budget that meets the needs of Canadians," he said in Calgary before a meeting with local business leaders.

"But if he fails, I've gotta be ready to form a government to replace him."

When Harper became prime minister three years ago, Charest was his strongest provincial ally. But the two were at virtual war Friday.

Charest did not disguise his annoyance with Harper, particularly over the federal plan to cap the growth of equalization payments to have-not provinces, in line with the rate of growth in the economy.

"I see this as Mr. Harper breaking a promise he had made on the fiscal imbalance."

Moreover, Charest said he was "rather irritated" by prime ministerial aides suggesting that Quebec's finance minister had initially called the equalization change reasonable. He called that assertion a "misrepresentation of the facts" and said he "made that point very clear this morning in the meeting."

Outside the meeting, federal and Quebec officials engaged in a spin war over the equalization changes.

Quebec officials also groused that Harper was wasting time during the meeting, having various federal ministers brief the premiers rather than giving premiers a chance to press their pet proposals.

Moreover, they were irked that Harper insisted upon attending a mid-day signing ceremony at which premiers ratified an agreement to eliminate barriers to trade and labour mobility between provinces. Harper, Quebec officials said, had nothing to do with hammering out the agreement.

Newfoundland and Labrador's Danny Williams and Prince Edward Island's Robert Ghiz echoed Charest's concern about the equalization change but did not appear eager to make the issue a priority. McGuinty sided with Harper.

Sources said several other premiers, including British Columbia's Campbell, "encouraged" Charest behind closed doors to put aside his province's grievances and address the bigger issues facing the country.

McGuinty said afterward that he's confident all first ministers understand that "there's much less tolerance for partisanship and parochialism and infighting and bickering" in the midst of a economic crisis.

Outside the conference venue, about 175 Quebec demonstrators braved minus 26 C temperatures as they sang an improvised version of O Canada and chanted for $2 billion annually in affordable housing cash.

Police, some wearing balaclavas against the cold, patrolled the barricaded entrance to Ottawa's old city hall just a couple of blocks from the prime minister's residence at 24 Sussex Drive.

There were some signs of disagreement among first ministers over some of the potential measures touted to stimulate the economy and shield Canadians from the worst of the global financial meltdown.

Harper told the closing news conference that the government is "looking at all options" on tax issues, but stressed that "it's important that the middle class of this country be part of an economic stimulus plan."

But most premiers seemed unenthusiastic about the notion of tax cuts.

Williams said he'd prefer to see more money to expand Employment Insurance - a view echoed by several other premiers.

"Marginal tax cuts for people who have jobs I don't think will have as big an impact as significant support for workers who have lost their jobs," he said.

Manitoba's Gary Doer said if there are tax cuts he'd prefer that they be targeted on things such as airport landing fees, where Canada's rates aren't competitive with other countries.

But Campbell endorsed income-tax cuts: "I think that having people's paycheques grow is one way that you build confidence."

However, there was unanimous agreement that the top priority should be massive and immediate investment in roads, sewers, bridges and other infrastructure.

While Canada's mayors are lobbying for an increase in direct federal gas-tax transfers for city projects, that idea was not endorsed coming out of the first ministers meeting.

"Necessity being the mother of invention, I think you're going to see different kinds of (funding) processes adopted both by the federal government and the provincial and territorial governments when it comes to getting money out the door," said McGuinty.

First ministers appeared unanimous in wanting to cut the red tape that has delayed the start of such projects in the past. Among other things, premiers are calling for a single environmental assessment for projects, conducted by the provinces in most cases, doing away with the need for additional, time-consuming assessments by federal and municipal governments.

The first ministers gathering is the culmination of weeks of behind-the-scenes federal-provincial consultations on the budget.

In their action plan, first ministers also agreed to:

-Strike a working group of finance ministers to develop options for ensuring credit remains accessible to businesses and individuals.

-Take more action to secure Canadian pension plans, including permanent changes this year to the framework for federally regulated pensions.

-Take "quick action" to provide more skills training for aboriginal workers.