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Winnipeg Free Press - PRINT EDITION

Europeans could learn from Canada

By: Editorial

Posted: 07/4/2012 1:00 AM | Comments: 0

Political leaders of Europe, meeting June 28 and 29 in their 19th debt crisis summit, astonished bond markets by taking substantial measures to shore up faltering Spanish banks and improve European credit management. Eighteen previous meetings had produced deadlock and inaction. Market prices of Greek and Spanish government bonds improved immediately on Friday and world equity markets expressed relief Europe was back in business.

Applause for that achievement had barely subsided, however, when European statisticians announced a fresh rise in unemployment. The Monday July 2 report showed the unemployment rate for the 17 countries that use the Euro as a common currency rose to 11.1 per cent in May from 11 per cent in April and from 10 per cent a year earlier. For the larger group of 27 countries, including the United Kingdom, that form the European Union, the unemployment rate rose to 10.3 per cent in May from 10.2 per cent in April. National unemployment rates in May ranged from 4.1 per cent in Austria to 24.6 per cent in Spain.

Canada, like Europe, has rich regions and poor regions. Employment and government revenues have long been weak in Quebec and the Atlantic provinces. The federal government's equalization program helps all provinces provide a standard level of public services. A unified national credit and banking system assures the banks of New Brunswick, for example, are not imperiled by a local budgetary or economic imbalance.

The present Canadian system was devised in the Depression years of the 1930s, when Manitoba, Saskatchewan and Alberta were overwhelmed with debt and other provinces were in grave difficulty. This system gives rise to political bickering among provinces about the equalization rules, but it works just the same. European countries have not yet developed corresponding methods and some of them have no wish to do so. Recession is forcing the issue in Europe as depression did in Canada 75 years ago.

Spanish, Italian and Greek banks and governments had an immediate problem of meeting next week's payroll. Germany, Luxemburg and the Netherlands saw a long-term problem with profligate spenders using a shared credit card to run up endless debt. The solution they found was to keep weak countries' banks in business for now and design a Euro-area bank supervisor. But the latest job numbers show the economic crisis has deepened. The short-term problems may return before the long-term solution takes effect.

Republished from the Winnipeg Free Press print edition July 4, 2012 A10

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