Since 2008, and throughout the European debt crisis, I have been telling my international counterparts that it is important to overwhelm the problem and get ahead of the markets. This is what the United States did in 2008, and it is what Canada did in 2009 by deploying a fiscal stimulus of roughly 4 per cent of GDP over two years in response to a crisis originating outside our borders. These bold actions paid off. Rating agencies have reaffirmed Canada’s strong AAA credit rating, and we are now on track to return to balanced budgets over the medium term. By contrast, actions taken by the eurozone have fallen short of overwhelming the problem. The “muddle through” approach has led to an erosion of confidence in public leadership and too many missed opportunities.
Ultimately, the adequacy of the actions taken will be judged by the markets. Repeated expressions of confidence by politicians are futile if the markets continue to cast their vote of non-confidence. The markets’ confidence in political leadership will only be restored when it is clear that politicians are willing to see the full scope of the problem, to focus on the key issues instead of pursuing sideshows such as the financial transactions tax, and to set out and implement a plan for tackling these issues.