In a conference call amongst the Group of Seven (G7) advanced economies, Greek debt concerns were discussed and Canada stepped up pressure on Europe to swiftly resolve the debt crisis, warning that failure to do so could harm even Canada’s relatively healthy banking sector, especially because of the risk of contagion.
Canada’s minister of finance, Jim Flaherty, the most veteran G7 finance minister, spoke in a speech earlier on Monday of “some more discussions today about the European fiscal situation directly in Greece but also the risk of contagion from that.”
“There is a real danger of contagion stemming from the situation in Europe, and we know that delay causes more difficulties, makes the situation more expensive and creates more strife at the end of the day,” he said.
Canadian banks, ranked as the world’s soundest by the World Economic Forum, have relatively minor exposure to peripheral European debt, but Flaherty reminded Canadians that even they had not been immune to the global financial crisis.
“There can be a contagion effect which can create difficulties in the banking sector, which is not desirable,” he said when asked what impact a Greek default would have on Canada.
Flaherty stressed in his speech that economies were clearly interrelated and the global situation remained fragile.
“As developments in Europe illustrate, significant financial risks remain. We have to face up to these challenges that are found elsewhere,” he said.