U.S. crisis shouldn't slow G20 growth plan - Canada

Reuters

* U.S. fiscal crisis to dominate G20 talks

* G20 can apply peer pressure to U.S.

* Canadian finance minister urges U.S. to tackle debt

* Canada to push for growth policy pledges in early 2014

By Louise Egan

OTTAWA, Oct 8 (Reuters) - The U.S. gridlock over governmentfinances will dominate a meeting of G20 finance officials thisweek but should not slow down the group's work on an action planto bolster long-term growth, a senior Canadian financialofficial said on Tuesday.

The official, who briefed reporters on condition ofanonymity, said focusing on the short-term crisis in the UnitedStates was the responsible thing to do because increaseduncertainty could throw a wrench in the efforts by the Group of20 leading economies to engineer stronger growth. He said theG20 might have some influence on U.S. officials through peerpressure and discussion.

But he said the group should not lose sight of its ultimategoal of figuring out how to improve on a global recovery thathas so far been unsatisfactory.

So far the U.S. government shutdown has had little effect onthe Canadian economy. Exporters, who rely heavily on the U.S.market, say they have enough inventory to last a couple of weekswithout problem.

But a prolonged shutdown and uncertainty over raising theU.S. debt ceiling could hurt Canada. "The closer you get to theedge of the cliff, the odds increase that somebody trips, soit's a problem," said Craig Wright, chief economist at RBCCapital Markets.

Finance Minister Jim Flaherty said he was confident of aquick resolution to the U.S. showdown and put the focus on thehigh level of public debt in Washington.

"That's a real long term problem for the U.S. and the globaleconomy that needs to be tackled credibly," Flaherty said.

FROM RUSSIA TO AUSTRALIA

At the St. Petersburg summit last month, leaders agreed toan action plan to create jobs and strengthen growth.

Canada, which has been co-chairing a working group on growthstrategies, wants countries to commit to specific policies andreforms to bolster long-term growth and will push for details onthose plans earlier rather than later in 2014, he said.

From the Canadian perspective, the Washington meetings willbe crucial for establishing priorities for 2014 when Australiahosts the G20.

Less of a worry for Canada is the eventual scaling back ofthe U.S. Federal Reserve's $85 billion-a-month bond purchasingprogram.

As long as the so-called tapering reflects an underlying U.Srecovery, that is good news for Canada, the finance officialsaid.

As for emerging economies which complain of marketvolatility due to talk of Fed tapering, the official saidspillover effects from U.S. monetary policy were not the onlyfactors at play and structural reforms were needed in some ofthose countries.

The G20 needs to work together to facilitate the transitiontoward normal monetary policy, he said.

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