British Prime Minister David Cameron had some sobering remarks for his country today when he offered that fighting back the deficit would be “unavoidably tough” and affect “our whole way of life.”  Although it is yet to be determined where cuts to programs and services will be made, it is clear that significant reductions in public spending are just around the corner.  When Chancellor George Osborne tables his budget on June 22nd, there’s even likely to be a modest bank tax – something that Canada was successful in taking off the global agenda at a meeting of finance ministers in Busan, South Korea this past weekend.  While the United Kingdom is one to watch in Europe, we know from the situation in Greece that there are others.  For example, the debt situation in Hungary made headlines this weekend, with the government ultimately denying reports that the country was close to a Greek-style risk of default.

Having just returned from South Korea, Canadian Finance Minister Jim Flaherty now insists that the #1 priority for the upcoming G20 Summit in Toronto is a plan for debt reduction and sustainable economic development in Europe.  Bank of Canada Governor Mark Carney also notes that it is easier to “connect the dots” between problems in Europe and Canada’s economic growth going forward. 

Given that Ontario has historically had so much of its growth tied to a strong U. S. economy, it might seem odd that Europe (the European Union accounts for about 9% of all Ontario exports) could negatively impact overall progress here.  This is the interdependency of our global economy playing out right before our eyes.  Let’s hope that a framework for European economic stability, along with concrete global financial reform is soon a reality.

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