Flaherty welcomes fiscal cliff deal, but warns U.S. not yet out of the woods

OTTAWA – Canada welcomed Washington’s last-minute deal on the fiscal cliff on Wednesday, but warned that significant risks remained and urged more action to put the U.S. fiscal situation on a sustainable path.

“Canada welcomes the agreement reached between the (U.S. President Barack Obama) and the Congress that protects the U.S. economy in the short term,” Finance Minister Jim Flaherty said in a statement.

“That said, there remain a number of significant risks to the U.S. economic outlook. It is my hope that leaders in the United States continue to work together to develop future action that will put the U.S. fiscal position on a sustainable path,” he said.

U.S. lawmakers cut a last-minute deal late on Tuesday to avoid the so-called fiscal cliff, automatic tax hikes and spending cuts that were due to kick in early in 2013.

Canada’s economy relies heavily on the United States, its biggest trading partner, and a U.S. economic downturn would most certainly mean the same north of the border.

While growth and jobs have recovered faster in Canada following the global recession, the country’s exports continue to falter due to weak U.S. demand and the strong Canadian dollar.

Flaherty had said last month that if the U.S. fiscal cliff was not averted by the White House and Congress, Canadians should expect a “bumpy road” ahead.

While U.S. lawmakers avoided economic calamity on Tuesday by agreeing to raise taxes on the wealthiest Americans, they will face further political showdowns over the next two months on spending cuts and on raising the nation’s limit on borrowing, with Republicans promising to use the debt ceiling debate to win deep spending cuts next time.

© Thomson Reuters 2013