Opposition demands PM fire Flaherty over ballooning deficit May 31, 2009
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Finance Minister Jim Flaherty, left, tables the federal budget in the House of Commons in January as Prime Minister Stephen Harper looks on. (Tom Hanson/Canadian Press)Prime Minister Stephen Harper faced calls from opposition MPs on Wednesday to fire his finance minister after Jim Flaherty acknowledged this week that Canada’s deficit will balloon to more than $50 billion this fiscal year.
Flaherty announced Tuesday the deficit will rise by more than $16 billion in 2009-10 from the $34 billion he forecast in January’s budget.
During Wednesday’s question period, Liberal Leader Michael Ignatieff lampooned Flaherty’s statements six weeks ago that his forecasts were “on track” and called his handling of the global recession “incompetence on a historic scale.”
Liberal Leader Michael Ignatieff stands during question period in the House of Commons.(Sean Kilpatrick/Canadian Press) “What is at stake here is the credibility of the government of Canada and the credibility of the minister of finance,” Ignatieff told the House.
“His projections are out the window again, leaving Canadians with the largest deficit in history — and no economic stimulus to show for it.”
Outside the Commons, Ignatieff said the public accounts of Canada are “in freefall, and they can’t tell where the bottom is.”
“He [Flaherty] has to go because there isn’t a businessman, there isn’t an investor, there isn’t a bank president in the country, there isn’t a foreign leader who can believe the government of Canada on its public finances,” he said.
January’s federal budget predicted five years of deficits with a shortfall of $64 billion over the next two years — a figure that will now climb to more than $80 billion.
Just two months before that, the Conservative government was touting years of surpluses in its fall economic update.
PM accuses leaders of hypocrisy
NDP Leader Jack Layton told the House that the government, backed by the Liberals, has “beaten all the records of bad economic performances” while infrastructure money isn’t getting out the door.
During question period, Bloc Québécois Leader Gilles Duceppe said the prime minister and Flaherty denied the existence of the economic crisis during the election.
He suggested they either didn’t see the crisis coming, or hid it from the public to get re-elected.
The prime minister countered that Canada’s deficit is affordable and small in comparison to deficits brought in by other G8 governments, while it also helps communities, industries at risk and the unemployed.
Harper said Canada was responding to the recession “from a position of fiscal strength” and accused opposition leaders of hypocrisy.
“They’re demanding we spend more money and on the other hand they say, ‘Don’t run a deficit,’” he told the House.
Flaherty himself told the House that expanding the deficit to stimulate the economy and increase employment insurance benefits is “the right thing to do for Canadians.”
But the three opposition parties have accused the Conservative government of failing to get stimulus money into the economy in the 120 days since the budget was tabled.
The Liberals, NDP and Bloc have also demanded the government expand the threshold of EI benefit qualification, arguing those hurt most by the recession aren’t able to get help.
Canada eyes sale of stake in AECL reactor business May 31, 2009
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The federal government is restructuring Atomic Energy of Canada Ltd. and may sell a stake in its commercial reactor division.
Minister of Natural Resources Lisa Raitt said Thursday the goal is to strengthen the nuclear reactor business — which produces the CANDU reactor — so it can better compete globally.
In the global reactor business, AECL, which is a Crown corporation, faces competition from foreign players such as General Electric in the United States and France’s Areva.
The government has hired N.M. Rothschild & Sons to develop a restructuring plan and provide financial advice. David Leith, a former deputy chairman and head of investment, corporate and merchant banking at CIBC World Markets, has also been tapped as an adviser to Raitt.
Raitt said the company’s research-and-development division, Chalk River Laboratories, will continue to be government-owned, but with private-sector management.
She said the restructuring is not related to the ongoing shutdown of the National Research Universal reactor at Chalk River.
Raitt said a review of AECL that began 18 months ago found that the company’s mandate and structure hampered its development. She also said the CANDU and R&D divisions have distinctly different needs.
Liberals, NDP blast plan
The government plan drew swift reaction from opposition MPs.
“What we see now is an announcement that, first, for the first time ever, [there is] open talk of privatizing AECL. And secondly we see talk of fireside sales in a recession,” Liberal MP David McGuinty said. “This is mismanagement on a colossal scale.”
New Democrat MP Nathen Cullen accused the government of trying to “hack up AECL for bargain basement prices” during an economic and medical crisis.
“These financial geniuses think this is a good time for a fire sale,” he told the House of Commons during Thursday’s question period.
Raitt responded by saying the New Democrats aren’t supporters of nuclear power and have made up their minds before reading the commissioned report.
AECL has about 4,800 employees, including 2,900 in research and 1,600 at its CANDU division.
Canwest Global subsidiary misses $10M in debt payments May 31, 2009
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Cash-strapped Canwest Global Communications Corp. said a subsidiary that owns 12 major daily newspapers and other publications has decided not to make about $10 million in debt payments that were due Friday.
Canwest 3-month TSX chartCanwest said the payment deferral by Canwest Limited Partnership is intended to allow it to continue normal operations while it tries to work out a broader financial restructuring.
In addition to the 12 dailies, the subsidiary operates 26 community newspapers and more than 80 online publications. It does not own the National Post.
The Winnipeg-based media company, which also owns the Global television network and other broadcast operations in several countries, has been negotiating for months with an array of lenders.
Canwest said Friday’s missed payments constitute an event of default which would allow its lenders to demand immediate payment of all the money owed under the credit facility. It did not say how much money is involved.
However, the company said it’s continuing negotiations with its main lenders and holders of its 9.25 per cent senior subordinated notes over a recapitalization deal.
On May 20, Canwest announced that another subsidiary, Canwest Media Inc., had secured $175 million in financing to enable it to keep operating.
At that time, it said it did not expect its main lenders or holders of another set of notes to demand immediate repayment while negotiations were going on.
Shares of Canwest lost five cents to close at 21 cents Friday on the TSX.
Federal officials reveal $2.2B deficit for fiscal year May 30, 2009
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A $3.6-billion deficit in March sent the federal government $2.2 billion into the red for the 2008-09 fiscal year, officials said Friday.
The latest reading on the status of the government’s coffers comes just days after Finance Minister Jim Flaherty said the deficit for the current 2009-10 fiscal year is projected to hit more than $50 billion.
For the 2007-08 fiscal year, the government ran a surplus of $11.4 billion.
In its monthly fiscal monitor released Friday, the Finance Department said the government slipped into the hole in March as its budgetary revenues fell $3.1 billion, or 14.4 per cent, from March 2008, due to declines in tax revenues.
For the full 2008-09 fiscal year, the government’s revenues decreased by $9.2 billion, or 3.8 per cent, mainly due to lower corporate income tax and goods and services tax revenues.
Corporate income tax revenue was down $11.1 billion, or 27.2 per cent, year-over-year due to lower business profits and the impact of tax reductions. GST revenues dropped by $4.4 billion, or 15 per cent, reflecting the one-percentage-point reduction in the GST on Jan. 1, 2008.
Government program expenses grew by $6.8 billion, or 3.5 per cent, due to higher transfer payments. That included a $2 billion increase in employment insurance benefits as more people lost their jobs due to the recession.
Public debt charges were down $2.3 billion from last year, due to lower interest rates.
After delivering the news that the government’s deficit projection for the current fiscal year will go from $33.7 billion to more than $50 billion, Flaherty will provide an update to the House of Commons about the government’s finances in June.
Abundant oil means stable gas prices this summer, says energy regulator May 30, 2009
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Last week, the national average price of gas crossed the $1 level for the first time this year.(Darryl Dyck/Canadian Press)
With oil prices slated to remain stable, consumers can be assured that the cost of gas this summer won’t approach last year’s record highs, says Canada’s national energy regulator.
The National Energy Board released its outlook for the summer Thursday, predicting U.S. crude oil prices of between $50 and $60 US a barrel.
“The current economic situation, combined with the high inventories of both oil and natural gas, will continue to put downward pressure on energy prices heading into summer,” the NEB said in a release.
‘Canadians will find that the price of gas will not go as high as it did last summer.’—Gaétan Caron, NEB
The NEB cautioned that uncertainties remain, and that the price of oil could be pushed up by production cuts mandated by the Organization of Petroleum Exporting Countries (OPEC) or unexpected spikes in demand.
But after meeting in Vienna on Thursday, the 12 members of the oil cartel said they intend to maintain production levels at their current rate.
“Canadians will find that the price of gas will not go as high as it did last summer,” said NEB chair Gaétan Caron.
Prices cross dollar threshold
In Canada, average gas prices hit $1.36 last July as crude oil hit a record high of $147 US per barrel, according to Calgary-based consulting firm MJ Ervin. Then the global economic downturn took hold and Canadian prices cratered to an average of 74.9 cents a litre in December.
Gas caps
All four Atlantic provinces regulate retail gasoline prices. In Nova Scotia, New Brunswick, and Newfoundland and Labrador, regulatory boards set maximum prices every two weeks in response to market conditions. In P.E.I., retailers must justify proposed gas price increases.
Prices have since begun to inch up, reaching an average of 88.8 cents a litre in April. And according to MJ Ervin’s figures, the average price of gas crossed the $1 level for the first time last week.
But the NEB forecast underlines what most market watchers have suggested — there won’t be the same spike in prices in 2009 that occurred a year ago. Demand for oil remains sluggish. The Paris-based International Energy Agency is forecasting a three per cent drop in global oil consumption in 2009.
OPEC predicts global oil demand will drop two per cent this year, despite talk of economic recovery in China and hints of the return of some growth to North America sometime in the next few months.
Benchmark crude for July delivery was up 13 cents Thursday at $63.58 US a barrel after earlier getting as high as $63.93.
The NEB also predicts there will be an adequate supply of electricity for consumers over the summer, citing expanded transmission capacity in Ontario and Quebec, and between New Brunswick and the United States.
The regulator suggests natural gas prices will average between $3.20 US and $4.20 per thousand cubic feet.
The charts below illustrate how gas and oil prices have fluctuated since January 2008. For each month, we took the average national price of a litre of gasoline and compared it to the cost of a barrel of oil.
The first chart breaks down monthly changes in the cost of each component of a litre of gasoline.
The second chart tracks the percentage change in the average national price of a litre of gasoline and a barrel of oil.
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Scotiabank’s Q2 profit falls 11% to $872M May 30, 2009
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Bank of Nova Scotia 3-month TSX chart
Bank of Nova Scotia reported a second-quarter profit of $872 million Thursday, down 11 per cent from a year earlier.
Earnings amounted to 81 cents a share, compared with $980 million, or 97 cents a share, a year ago.
Scotiabank said revenue grew by 12 per cent to a record high of nearly $3.6 billion. Return on equity, a key profitability measure, was 17.6 per cent, down from 21.4 per cent.
Provisions for loans losses more than tripled to $489 million from $153 million.
“As expected, earnings were impacted by rising provisions for credit losses across all business lines due to the current economic environment, including an increase in our general allowance and a sectoral allowance for auto exposures,” CEO Rick Waugh said in a release.
“We are well prepared for this stage of the credit cycle and our loan portfolios are performing within planned risk tolerances,” he said. “We will continue to prudently manage exposures across industries and geographies.”
Waugh said the weak global economy and uncertainty in financial markets will continue to put pressure on the bank’s results this year.
Shares of Scotiabank closed up 15 cents to $37.90 on the TSX.
Ex-Hollinger executive Boultbee granted bail pending appeal May 28, 2009
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Former Hollinger International executive John Boultbee, 65, of Victoria, B.C., arrives at the federal building in Chicago on Dec. 10, 2007, for sentencing in his racketeering and fraud trial.(Paul Beaty/Associated Press)Former Hollinger International Inc. executive John Boultbee was granted bail Thursday by a judge in Chicago, pending the outcome of his U.S. Supreme Court appeal.
Boultbee was convicted of fraud in 2007, along with former Hollinger International CEO Conrad Black and company executives Peter Atkinson and Mark Kipnis. He was sentenced to 27 months in jail and has been in a California prison since last July.
Prosecutors said Judge Amy St. Eve, who presided over the original trial, granted a motion to release Boultbee on $500,000 US bail until the Supreme Court renders a decision.
Lawyers for Black, who is serving a 6½-year term in a Florida prison, are still considering whether to apply for his release on bail.
Atkinson, who is serving a two-year sentence, did not take part in the appeal. Kipnis served six months of house arrest, but joined the petition to have his conviction overturned.
The Supreme Court agreed on May 18 to hear the appeals.
Ruling expected in 2010
Black’s lawyer, Miguel Estrada, said he expects the appeals will be heard in November or December and a ruling to be issued by June 2010.
Boultbee’s lawyer, Richard Greenberg, said, “I’m grateful for the courts and the governments co-operating in releasing Mr. Boultbee, because, in the event he wins in the Supreme Court, he would have served his sentence otherwise and the victory would have been pyrrhic.”
It’s not known when Boultbee will be set free, because the release must be sorted out by the U.S. Bureau of Prisons and the Department of Homeland Security.
In this Dec. 10, 2007, file photo, convicted newspaper baron Conrad Black leaves the federal building in Chicago.(Jerry Lai/Associated Press)A jury ruled that Black and the others had committed fraud when they diverted millions of dollars in non-compete payments from the sale of Hollinger newspapers. Black was also found guilty of one count of obstruction of justice for removing boxes of documents from his Toronto office.
Black’s lawyers argue the men did not commit fraud because they did no harm to the company. The lawyers also allege that the prosecutor defined the word “fraud” in a way that is very different from the criminal definition.
Earlier appeals were rejected by the U.S. Court of Appeals for the Seventh Circuit, leaving the Supreme Court as their last chance.
Hollinger International once owned the Chicago Sun-Times, the Daily Telegraph of London, the Jerusalem Post and hundreds of community newspapers across the United States and Canada.
‘I’m busy doing my job’, Flaherty says of recession, $50B deficit May 28, 2009
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The $50-billion deficit Canada is facing this fiscal year is necessary to help Canadians weather the worst economic recession since the Second World War, Finance Minister Jim Flaherty said Thursday, rejecting calls from the opposition to resign.
“I’m busy doing my job. There’s a global recession going on,” Flaherty told CBC News.
Flaherty announced Tuesday the deficit will rise by more than $16 billion in 2009-10 from the $34 billion he forecast in January’s budget.
The announcement prompted calls from the opposition on Wednesday for him to step down. Liberal Leader Michael Ignatieff called Flaherty’s handling of the global recession “incompetence on a historic scale.”
Flaherty said Thursday the projected deficit only represents about 3.3 per cent of Canada’s gross domestic product. That pales compared to the 10 per cent and greater deficits Japan, the United Kingdom and the United States are facing, Flaherty said.
“None of these economists, I can tell you, predicted this recession. And none of these economists predicted the depth of this recession. I have to deal with the reality of it — not the speculation surrounding it — and that’s what we’re doing,” he said.
‘Right thing to do’
The Conservative government is being responsive to the needs of Canadians with respect to unemployment and preserving jobs in the auto sector, Flaherty said.
“These are expensive — billions of dollars — and that’s why we have an additional deficit. But it’s the right thing to do.”
More than half of the additional spending is aimed at preserving the ailing auto industry, he said.
“But that’s saving an industry and that’s saving thousands of jobs in our country during a recession. I hope the opposition will recognize that’s the right thing to do actually.”
Can afford to do more: Flaherty
Flaherty said recent reports from the International Monetary Fund indicate Canada can afford to take more action to address the recession.
The finance minister also maintained Canada is still on track to be out of a deficit position by 2013.
“As the economy recovers, as we run surpluses, we’ll use that money to pay off the deficits we’re going to incur,” he said.
January’s federal budget predicted five years of deficits with a shortfall of $64 billion over the next two years — a figure that will now climb to more than $80 billion.
Just two months before that, the Conservative government was touting years of surpluses in its fall economic update.
The three opposition parties have accused the Conservative government of failing to get stimulus money into the economy in the 120 days since the budget was tabled.
The Liberals, NDP and Bloc Québécois have also demanded the government expand the threshold of EI benefit qualification, arguing those hurt most by the recession aren’t able to get help.
Laurentian Bank Q2 profits hold steady in tough times May 28, 2009
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Laurentian Bank of Canada managed to avoid a huge drop in profit in the bank’s second quarter, according to its latest earnings report released Wednesday.
The Montreal-based chartered bank made $21.2 million for the period ended April 30, 2009 — down 15 per cent compared to earnings of $25.1 million for the same period one year earlier.
Given the recession, however, the Quebec-focused bank said it was pleased with its ability to maintain its profitability.
“The difficult economic conditions and unprecedented low interest rate environment have hampered profitability during the last quarter. However, measures aimed at restoring revenue growth have started to generate results,” said Réjean Robitaille, Laurentian’s president and chief executive officer.
For the first six months of its fiscal year, Laurentian produced a 9.3 per cent return for shareholders compared to a target range of 10 per cent to 12 per cent.
Three-month stock chart for Laurentian Bank of Canada
By contrast, the Bank of Montreal saw its quarterly earnings tumble by 44 per cent in its latest financial report.
On a per-share basis, Laurentian earned 76 cents in the second quarter compared to 93 cents for the same period one year earlier.
As an example of the tough economy, however, Laurentian’s quarterly revenue was flat at $154.8 million, compared to revenue of $155.5 million for the same three months one year earlier.
Laurentian was able to hold on to its profit mainly through growing its base of residential mortgages. The bank said it had boosted its home lending by $368 million in the three-month period without increasing the risk to the mortgage portfolio.
Laurentian also hiked its commercial mortgage and commercial loan portfolios by more than $120 million and $90 million, respectively, for the first six months of the year.
S&P launches Islamic-based Toronto index May 28, 2009
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Standard & Poor’s is launching a new index of Canadian companies that are compliant with Islamic Shariah law, the company said Wednesday.
The S&P/TSX 60 Shariah index will contain firms that engage in businesses acceptable to the Islamic legal code, Standard & Poor’s said.
The religious criteria exclude businesses that sell products such as alcohol, tobacco and pork or engage in certain types of financial lending.
The new index will allow investors who hold stocks that reflect Islamic law to track the overall performance of their holdings, said Alka Banerjee, vice-president of S&P’s index services.
“The index will create new opportunities for Islamic investors to benchmark their Canadian investments, and for asset managers to create new investment products serving the Islamic community,” he said.
S&P used a Kuwaiti firm, Rating Intelligence Partners, to screen various companies for the new index.
With its Shariah indicator, Canada is up-to-date with other markets. S&P already has 24 similar indices, including in Europe and Japan.
Of course, following Islamic law has not proven to improve a portfolio’s performance any more than other indices.
India’s CNX 500 Shariah index, for example, stood at 981 in late May, down 21 per cent compared to the same month one year earlier.
