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Now Canada Can Win Just By Not Losing, Says Former PM

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You may recall that during the 2008 financial crisis, Canadian banks were praised for not falling victim to the subprime lending debacle. The country's conservative regulations were celebrated in a classic satirical commercial by Toronto comedian Rick Mercer, who questioned whether Bay Street had survived by fluke or design. His slogan: "Canada's Banks -- Accidentally Not In Crisis Yet."

Well, now a new catchphrase needs to be coined. This one would refer to Canada's relative good fortune next to the US and the Eurozone countries on days like today -- something like, "Canada's Economy. If we can just stand still, we'll win the race." 

The Globe and Mail is reporting that former Prime Minister Paul Martin made a statement along those lines this weekend.  “This is an opportunity for Canada,” he said in an interview with the paper on Sunday.

Canada too has a deficit that it should grapple with, and it must continue to bring down its debt-to-GDP ratio, Mr. Martin said. But it is not in need of the severe medicine that other economies must now take, medicine that will have long-lasting side effects and allow Canada to become even more of a positive outlier.

Mr. Martin would like to see Canadian governments use this time to make investments in infrastructure and education systems that will further distinguish the country. “We should be able to attract the best and brightest into our industries better than we ever have before, simply because of what’s going on in other countries.”

So the other guys are making us look good. That's one way to win it.

Although Martin ran the government from 2003 to 2006, he's better known as the finance minister who helped Canada's fiscal house get back in order when former Prime Minister Jean Chrétien was in power during the 1990s. Martin is credited with restoring Canada's AAA rating following a damaging downgrade to AA+, so his words have some weight.

The problem is that the opportunity he sees, if it exists at all, probably won't come cheaply. "Canada Not Immune to Global Economic Woes," reads the headline on another popular story today. That piece outlines the connection between the Canadian dollar and soft or volatile commodity prices, and adds:

In a statement late Friday, Finance Minister Jim Flaherty warned that Canada was not immune to financial fallout from the debt downgrade in the U.S., nor to the debt crisis in Europe, where policy makers were struggling to address systemic economic problems in Italy and Spain.

“Over the past few days, financial markets have reacted to the uncertainty generated by concerns about U.S. growth and the continuing debt problems in Europe,” Mr. Flaherty said. “As we have always said, Canada is not an island. We are a trading nation, with about a third of output generated by exports and deep linkages with the US economy. The global economic recovery remains fragile and this uncertainty may eventually impact Canada.”

Mr. Flaherty added that, “Our financial systems remain strong, in part reflecting ongoing sound supervision. Moreover, we have a range of measures to respond to possible financial sector disruptions.” He also pointed to the employment numbers that came out on Friday as evidence that the North American recovery was not sliding backward into a recession.

Meanwhile the current Prime Minister, Stephen Harper, is in resource-rich Brazil drumming up deals and calling the South American giant a "natural partner."
POSITION:  No positions in stocks mentioned.