Trudeau has no plans to austerity to pay off the debt

Justin Trudeau rules out the possibility of introducing short-term or medium-term austerity measures or a special tax in order to repay the huge debt that Canada has accumulated during the pandemic COVID-19. Canada was in a good position economically at the entrance of the crisis and it will come out just as strong, predicted the prime minister.

“We will be able to get out, I hope, in a better position than others and one should not have to take exceptional measures “, he said. It is that the director parliamentary budget (DPB) has predicted Thursday that the deficit for the year 2020-2021 will reach the historic high of 252 billion, light years ahead of the $ 28.1 billion that had been projected in the economic update of December, when the pandemic and the fall in oil prices were not on the radar screen in Ottawa. Never in the history of Canada, the deficit had reached such a level, not even in relative terms. Such a deficit would represent 12.7% of gross domestic product (GDP) of the country, while the highest ratio recorded was 8% in 1984-1985.

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This amount will be added of course to the debt of the country, that base will have exploded > dramatically, by about 35% this year. The debt, or accumulated deficit, was $ 685 billion in 2018-2019 (the latest year for which figures are available), the amount to which it will be necessary to also add the deficit in 2019-2020, now estimated at 24.9 billion. According to the DPB, the government of Canada’s debt account for 48.4 per cent of GDP. It is necessary to go back to 1999-2000 to find a ratio as high. For several years, Ottawa was trying to bring this ratio within a range of 25 % to 30 %.

The DPB has also confirmed that the Provision of canadian emergency (PKU), which allocates $ 2000 per month to workers who have lost their incomes due to the pandemic, will cost much more expensive than what was originally intended, or 35.5 billion instead of $ 24 billion. It is that, since the announcement of its implementation, the PCU has been expanded to cover seasonal workers and freelancers earning less than $ 1000 per month. Similarly, the DPB provides that the wage subsidy will cost $ 3 billion more, for an estimated bill of $ 76 billion.

In total, direct support measures put in place by Ottawa to cross the pandemic will cost $ 146 billion. This represents an increase of approximately 50 % of the annual expenditure usual for the federal government. To this sum add the number of measures to generate liquidity in the economy — but which in the end will cost nothing to the Treasury — amounting to 671 billion.

Despite these numbers unprecedented, the prime minister does not think that this is the time to think about the public finances after the crisis. “It is not at all thinking about it now,” replied Mr. Trudeau to the journalists that the talonnaient. “We have great confidence in the economic recovery, in the ability of Canadians to take back our economic activities and the prosperity that we had seen for many years. The fundamentals of our economy remain very strong. […] Certainly that you’re going to have thoughts to do it, but for the moment, we are focused on what we need to do to help Canadians get through. “

In its analysis, the DPB was also noted that this level of record debt in Canada does not compromise its future borrowing capacity. “Given the temporary nature of the fiscal measures and the experience of the past, and given that the rates offered on the credit market are historically low, it suggests that the government could incur additional borrowings, if necessary. “

With Marie Vastel

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