Premiers, PM plot economic rescue (Canada Watching Big 3 Bailout)

The Star ^ | 111108 | Bruce Campion-Smith Robert Benzie Les Whittington

[Fred]

OTTAWA–Faced with a darkening economic outlook, Prime Minister Stephen Harper and the premiers are pledging to speed up infrastructure spending, look at easing rules for retirement savings and consider ways to boost Ontario's hard-hit automotive sector.

With an eye on the massive rescue package offered by the U.S. government for General Motors, Ford and Chrysler, Harper yesterday dangled the possibility of a government bailout package to help the auto industry, but fell short of promising concrete action.

And in a major development for Toronto and other urban centres, Harper and the premiers emerged from a meeting about the economy agreeing to speed up billions of dollars in investments in infrastructure such as roads, bridges, transit and other projects.

Harper also sounded open to changes to ease the impact of sagging stock markets on seniors' retirement savings and corporate pension funds.

The politicians used such phrases as "cordial," "productive" and "co-operative" to describe their gathering and there was little evidence of partisan bickering as they confronted the economic crisis that is threatening jobs – and their own budgets. The premiers and Harper are planning another meeting about the economy in January.

"There was a lot of goodwill around the table. The Prime Minister was in a genuine listening mode. There was a full, frank and calm exchange," said Premier Dalton McGuinty, whose province is running a $500 million deficit and will slip into "have-not" status next year when it will receive money under the equalization program.

"The premiers came with many ideas, strong ideas and opinions of their own. We did not agree on everything, but there were many common themes," Harper said.

The politicians left no doubt that the economic downturn is expected to get worse.

"We all recognize the urgency of the situation. We all recognize that the economic situation is going to get worse before it gets better. We do have in front of us an economic storm," Quebec Premier Jean Charest said after the meeting.

Harper's comments marked the first time his government, which has been generally cool to bailing out the Big Three Canadian automakers, has opened the door to the possibility of a financial transfusion for the automotive sector.

"I think we all agree we want to see a strong auto sector in this country going forward that's part of a North American industry. And we're prepared to look at options to achieve that," he said. "The government of Canada will examine all possibilities. We haven't ruled anything out or anything in."

Harper said he's closely watching efforts south of the border, where the U.S. government has committed $25 billion for this effort.

"We are also aware of some actions that are taking shape in the United States," the Prime Minister said.

McGuinty, noting "the urgency of the circumstances before us," expressed confidence that help is on the way for the auto sector.

"I think there's an opening here for us. I think the Prime Minister understands that right now we've got an unlevel playing field when it comes to ... levels of support for the Detroit three in particular," said McGuinty.

"The U.S. has stepped up to the table already with $25 billion. The (European Union) is putting forward 40 billion by way of euros. We're going to have to find a way to strengthen our level of support for our auto sector."

While Ontario sources have suggested Ottawa contribute $4 billion in auto relief, McGuinty, who is meeting with industry officials next week, declined to name a specific price other than to say there should be "proportionality" with the U.S.

Harper said that given the depth of the economic crunch, accelerated infrastructure spending should be targeted for projects that will provide short-term economic stimulus.

"This will help support general economic activity. I'm very confident that that is going to occur over the next year," he said.

The premiers went into the meeting united in their call for Ottawa to relax the rules around retirement funds to spare seniors from taking a big hit on the declining value of their portfolios.

Charest, for example, wants the federal government to give seniors an extra two years – to age 73 – to convert their retirement savings into income funds.

The Prime Minister said there's a misconception that seniors who convert their retirement funds into retirement income funds have to sell off their stocks first.

"That is not actually true. That is the misunderstanding but there clearly are some issues in the pension area that are causing some concern," said Harper, who promised to look at the issue.

Newfoundland Premier Danny Williams, who has frequently sparred with Harper, said there was "no tension in the room" – an indication of the gravity of the economic crisis.

"The Prime Minister was quite frank. He didn't sugar-coat anything. He indicated that we have a serious situation on our hands," said Williams, expressing sympathy for Ontario's auto workers.

Saskatchewan Premier Brad Wall urged unemployed Ontarians to considering going to his booming energy-rich province.

"We were in Toronto with a job fair not very long ago with that message. We have a labour shortage and we have opportunities. We want to let other Canadians know that," said Wall.

"In some trying times, there are opportunities and jobs."