The Canadian Press - ONLINE EDITION

European economy vulnerable to geo-political risks, risky lending, says Oliver

  • Print

OTTAWA - Finance Minister Joe Oliver says developments in the Ukraine and Iraq are endangering the global financial and economic recovery, particularly in still fragile Europe.

The minister, who was nearing the conclusion of his trip to the United Kingdom, Germany and Poland, says he been alerted by Europeans about mounting risks.

He notes that the overall growth rate in Europe remains very low and the latest inflation reading was only 0.5 per cent.

"So there is a very real risk of deflation and the banking system is more fragile than we would like to see," Oliver said Friday.

"In this environment additional external shocks can be quite dangerous," he added, citing the political tensions in the Ukraine and strife in Iraq that has led to a spike in oil prices.

Despite unprecedented low interest rates, governments and companies are not investing, he says, and lenders have again started taking on risk in the search for yield.

He says the gap in yields among countries and companies with very different credit ratings have narrowed, which "suggests that lenders are taking on more risk than they have before."

Oliver says Europeans are well aware of the challenges confronting them and that they will be discussed at the next G20 meeting in the fall.

Relative to Europe, Canada's banking system is doing well, as is the economy overall, he said.

On Thursday, Canada's financial system supervisor, however, expressed similar concerns about Canadian banks going out on the limb with risky loans.

"While underwriting practices may be good today, past experience suggests that it could become very tempting in the current environment for mortgage lenders and insurers to ease up under the enchanting lull of the siren song of market share," Mark Zelmer of the Office of Superintendent of Financial Institutions told a housing conference.

Most analysts blame lax lending standards, particularly in the U.S. housing market, for the financial collapse of several American investment banks in 2008 that triggered the global recession.

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Bombers This Week: Huge game against Lions

View more like this

Photo Store Gallery

  • A goose comes in for a landing Thursday morning through heavy fog on near Hyw 59 just north of Winnipeg - Day 17 Of Joe Bryksa’s 30 day goose challenge - May 24, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)
  • MIKE.DEAL@FREEPRESS.MB.CA 110621 - Tuesday, June 21, 2011 -  Doug Chorney, president Keystone Agricultural Producers flight over South Western Manitoba to check on the condition of farming fields. MIKE DEAL / WINNIPEG FREE PRESS
my2011poy

View More Gallery Photos

Poll

Should the federal government be able to censor how Ottawa is portrayed in the CMHR?

View Results

Ads by Google