By David Barwick

MEXICO CITY (MNI) – Europe has made “good progress” in dealing with
its problems since the G-20 leaders’ summit in Cannes last year,
Canadian Finance Minister Jim Flaherty said Sunday.

Flaherty, briefing the press following the meeting of G-20 finance
ministers and central bankers, nevertheless admitted that he would be
more confident about Europe’s ultimate success in constructing the
necessary firewall if relevant discussions had not already been going on
for two years.

It is “an essential prerequisite” that Europe “establish a large,
effective firewall,” he said. “Good progress has been made by our
European colleagues since Cannes,” he said, citing in particular the
fiscal compact, the ECB’s generous liquidity provision and ambitious
reforms being undertaken in Italy and Spain.

The “complement” of a “credible firewall” is now needed “to
reassure markets the Eurozone has the necessary support,” he urged.

Asked if he was more or less confident about such a firewall
ultimately being set up, Flaherty described himself as “a little bit
more confident, modestly more confident.”

He added, though, that “there’s still a lot of obstacles. We’ve
seen over the past two years now how difficult it is for the Eurozone
members to take action together.”

“The absence of a fiscal authority … is quite a drawback in
decision-making,” he observed, while “the other concerns relate to the
conditionality that non-European countries talk about with respect to
any extension of more resources to the IMF.”

“Our view on that is Europe has substantial resources and has
sufficient resources to fund a necessary firewall,” he said. It is time
for “Europe to step up to the plate and do that.”

Meetings this weekend “provided some degree of solace” on the
issue, Flaherty reported.

Pressed on whether he was not merely “more confident”, but actually
confident without qualification, Flaherty hesitated before pronouncing
himself “encouraged honestly” by what the various European participants
had had to say about what they had been doing and “what their plans were
in March.”

“The reason not to have stronger confidence is we’ve been having
these discussions for two years,” he said.

Flaherty said Canada “fully” supported Spain and Italy as these
countries attempted “to make major reforms, which is very difficult to
do in their societies.”

Turning to his own country, the Minister noted that Canada had
“weathered the global economic storm relatively well.”

–Frankfurt bureau tel.: +49 69 720142. E-mail: dbarwick@marketnews.com

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