Financial Update

Harper says Canadians can breathe a bit easier after G20 agrees on plan of attack

· TSX -296.82pts (Reuters) ending another rough week on a sour note, as investors took profits from Thursday's 400 point rally and embraced tighter their fears that recession will cut oil demand and starve earnings in the oil sands.
· DOW -337.94pts
· Dollar -.94c to $81.16US.
· Oil -1.20 to $57.04US per barrel. A record drop in U.S. retail sales in October refreshed concerns that a prolonged recession will curb demand for oil.
· Gold +32.50 to $742.40US per ounce In one record-setting day, gold shot out of its funk and reasserted itself as the ultimate safe haven while the U. S. financial sector crumbles all around it.

WASHINGTON At least 110 banks have requested about $220 billion US from the U.S. Treasury Department’s rescue fund, and many more are expected to submit applications. The figures, from the banks’ own statements, indicate the requests are closing in on the $250 billion the Treasury set aside from the $700- billion fund to purchase stock in banks

G20 leaders head home with plan to fight mutual foe: the economic meltdown By Lee-Anne Goodman, The Canadian Press

WASHINGTON - The emergency G20 summit this past weekend brought together leaders from nations that have spent centuries as far apart politically and philosophically as they are geographically.

Yet former foes that include the United States, Russia, India and China are uniting in the face of a common enemy - a global economic meltdown that's threatening to plunge the world into a depression.

That doesn't mean, however, that there weren't tough pills to swallow and tensions along the way as the leaders of the far-flung G20 nations, including Prime Minister Stephen Harper, formulated a broad action plan aimed at combatting their mutual menace on numerous fronts.

The magnitude of the crisis is such that Harper emerged from the summit to suggest he would cast aside his longtime aversion to deficit spending and dole out whatever cash was necessary if it was for the good of the world's financial health.

"Look, if there is a worldwide agreement, then we will engage in sufficient stimulus to do our part in carrying global economic demand," Harper said.

"We will fulfil our part of that agreement."

Discussions were reportedly pointed at times behind the scenes at the summit, with French President Nicolas Sarkozy apparently causing some of the biggest frustrations.

Diplomats present at the summit told the Washington Post on Sunday that Sarkozy was the slowest to commit to a moratorium on protectionist measures and a reaffirmation of free trade at an extravagant White House dinner on Friday night.

His stance irked some of the developing world leaders whose countries have been brutalized by a decrease in exports in the face of the global economic crisis, and who would be further harmed by protectionist trade policies.

Sarkozy's calls for broad global regulation also prompted Harper to reiterate his argument that even in regulation-friendly Canada, the idea would be seen as trouncing on national sovereignty.
Senior Bush officials were also forced to play down a number of remarks Sarkozy made at his news conference following the summit, including his boast that Europeans got "virtually everything" they sought at the table.

Each country is expected to implement a series of reforms by the end of March aimed at easing the crisis and stimulating their economies. The G20 meets again on April 30, three months after the inauguration of president-elect Barack Obama.

While Obama wasn't at the summit, his presence nonetheless loomed large as his representatives - former secretary of state Madeleine Albright and one-time Republican congressman Jim Leach - met with officials of 17 of the G20 nations.

Canada was among them. A senior government official wouldn't reveal what was specifically discussed during the meeting.

But when the House of Commons resumes sitting on Tuesday for the first time since Harper's re-election last month, the prime minister is certain to be asked about the type of relationship he'll try to forge with Obama amid the economic meltdown.

He'll also likely face tough questions about the health of the Canadian economy.

Canada is still hoping to balance its budget, Harper said in Washington this weekend, and he assured Canadians that Ottawa was prepared to do whatever necessary to lessen the impact of the crisis.

"There are going to be very tough adjustments that will have very real effects in the Canadian economy but we will continue to be pragmatic and flexible while maintaining good, long-run economic policies."

Finance Minister Jim Flaherty is tabling a mini-budget at the end of this month, several weeks earlier than usual due to the crisis. He's suggested the government will announce new spending aimed at stimulating the economy.

Harper didn't rule out a bailout package for Canada's Big Three automakers on the weekend, a debate that was raging furiously in the United States as Washington decided whether to go ahead with a proposed US$25 billion lifeline for the car manufacturers.

Canada has to "ultimately undertake our own actions and be convinced that those actions are not just in the interests of the auto sector but in the best interests of the Canadian economy and Canadian taxpayers," he said.

Harper promised during his election campaign to put another $200 million into Canada's $250 million Auto Innovation Fund.

Obama, for his part, is in favour of rescuing the auto industry and its three million jobs.

"For the auto industry to completely collapse would be a disaster in this kind of environment," he said in an interview with "60 Minutes" scheduled to air Sunday night.

"So it's my belief that we need to provide assistance to the auto industry. But I think that it can't be a blank cheque."

Harper says Canadians can breathe a bit easier after G20 agrees on plan of attack Lee-Anne Goodman, The Canadian Press

WASHINGTON - Canadians can breathe a bit easier about the global economic meltdown after the world's most powerful countries agreed on a series of measures to help ease the crisis, Prime Minister Stephen Harper said Saturday.

"The declaration should give us all hope, and I would hope would give the markets some reassurance," Harper told a news conference, referring to the so-called G20 countries' communique following the end of their emergency summit.

Canada is in relatively good shape compared to other nations as it heads off the crisis, and will issue a financial update at the end the month.

The International Monetary Fund recently forecast that the Canadian economy will grow moderately over the next year and avoid falling into a recession.

Nonetheless Harper sounded a cautious tone Saturday as he addressed the media at the Canadian Embassy.

"There are going to be very tough adjustments that will have very real effects in the Canadian economy but we will continue to be pragmatic and flexible while maintaining good, long-run economic policies," said the prime minister, flanked by Finance Minister Jim Flaherty and Ambassador Michael Wilson.

"We will respond in a way that will minimize Canadians' exposure to these problems and maximize our ability to come out of this in a strong position."

Harper and 19 other world leaders, including President George W. Bush, emerged from the meeting to say they'd taken important first steps to deal with the financial meltdown that has the world economy on the brink of depression, and to prevent another from happening again.

Among other measures, they agreed to flag risky investing and regulatory weak spots in hopes of avoiding future financial meltdowns, and have endorsed broad goals to fend off any future crisis while reviving the global economy.

The plan endorses an early warning system for problems such as the speculation frenzy that fed the U.S. housing bubble. It also calls for the creation of "supervisory colleges" of financial regulators from many nations to better detect risky investing and other potential problems.

The G20 leaders, who meet again April 30 left Washington armed with a series of reforms to put in motion by the end of March.

"The big question is how do we establish good regulatory structure without destroying the incentive to innovate, without destroying the marketplace," Bush said Saturday outside the stately National Building Museum where the summit was held.

"Transparency is very important so that investors and regulators are able to know the truth."

Adding that the summit "is not going to solve the world's problems," Bush said: "There is more work to be done."

Bush called for the emergency summit a few weeks ago in the face of the worldwide economic meltdown. It's the largest meeting of its kind in more than a decade.

The meeting comes at an awkward time for Bush, a wildly unpopular lame-duck president who's leaving office in two months when Barack Obama is officially sworn in as America's 44th president.

Obama has made it clear since his historic election Nov. 4 that Bush is still the president, and must remain actively involved in dealing with the crisis in the next few weeks.

Nonetheless, many of the officials who descended upon Washington for the summit had been clamouring for access not to Bush and his people but to the man who holds the real power in the U.S. capital - Obama.

The president-elect appointed two emissaries - one-time secretary of state Madeleine Albright and former Republican congressman James Leach - to attend on his behalf, reluctant to be seen as interfering during the waning days of Bush's presidency.

Senior Canadian officials met with Albright and Leach early Friday, hours before Harper arrived in Washington to attend the extravagant White House dinner that kicked off the summit.

While the prime minister is opposed to a vast international regulatory system that would impose global rules on each country's banking systems, he has strongly advocated the notion of "peer review" of every G20 country's national financial regulations.

Harper said he was pleased to see that idea was embraced at the summit.

"There is an agreement to look at transparent assessments - independent transparent assessments - of financial regulatory systems, so that will happen," said Harper.

"Canada submitted to IMF assessments in the past, and as we told our American friends and others, we found those very useful in the past ... so that has been recognized in the declaration."
Not far from the summit, a handful of protesters carried neon yellow signs that read: "Money for people's needs, not bankers' greed" and "Money for jobs, not for war and occupation."

The countries represented at the summit were the U.S., Canada, Argentina, Australia, Brazil, Britain, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea and Turkey.

Those countries and the European Union make up the so-called G20.