Canada to stimulate economy through government spending, tax cuts

Special Report:Global Financial Crisis

OTTAWA, Jan. 27 (Chinese media) -- Canada's Conservative

government on Tuesday unveiled a plan to stimulate the economy through profuse

government spending and tax cuts.

The government plans to invest 12 billion Canadian dollars (about 9.6 billion U.S. dollars) on infrastructure and cut personal income taxes and businesses taxes, among other measures, to help rescue the sagging economy, Finance Minister Jim Flaherty said while delivering the 2009-2010 fiscal year budget in the Parliament.

Canadian Finance Minister Jim Flaherty arrives before speaking to the economic community in Toronto November 28, 2008.(Chinese media/ReutersFile Photo)
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The budget comes at a massive cost, resulting in a

deficit of 85 billion Canadian dollars over the next five years, including 33.7

billion dollars for the 2009-10 fiscal year. That will be the first deficit for

the country since 1996.

"We must do what it takes to keep our economy moving,

and to protect Canadians in this extraordinary time," Flaherty said in his

budget speech in the House of Commons.

The budget also promises to improve access to

financing for consumers and businesses with a funding of over 200 billion

Canadian dollars, invest in social housing and job trainings, help ailing

industries such as the auto sector as well as provide subsidiaries for the

aboriginal, the poor and other groups mostly hit by the economic recession.

Flaherty hinted more actions could be taken if deemed

necessary, predicting the economy to contract by 2.7 percent in 2009, which is

worse than the 1.2 percent drop that is the average of private-sector forecasts.

The government had warned "difficult years ahead" in the throne speech Monday.

The budget is subject to a series of confidence votes

in the Parliament later this week and whether it passes or not will decide the

fate of the government. The minority government needs the support of at least

one opposition to survive.

After announcing the budget, Flaherty urged the

oppositions to support the government.

"This is the budget we need for the country,"

Flaherty told CTV television. "That's why our government introduced it, and I

hope it's accepted by the House of Commons."

Meanwhile, two opposition parties, the Bloc Quebecois

and the NDP said immediately after the budget release that they will not support

it, while the Liberals insist they will reserve their decision until Wednesday

morning.

NDP leader Jack Layton said in a statement the budget

will not adequately save and create jobs. "This budget fails to restore

confidence in Mr. Harper's ability to protect the vulnerable in Canada ... it

does not give us confidence in the direction the Harper government is going,"

said Layton.

Bloc Leader Gilles Duceppe criticized the budget for

not including enough for pay equity, the environment, seniors, social housing or

lower income families.

"Obviously, we will not support that budget," Duceppe

told reporters.

Speaking outside the House of Commons, Liberal Party

Leader Michael Ignatieff said he would meet with his caucus in the evening

before announcing whether he will support the budget at 11a.m. (1600 GMT)

Wednesday.

But analysts noted Ignatieff may be leaning towards

supporting the budget.

"There are some developments in this budget that

would have been unthinkable before Christmas," Ignatieff said, without going

into specifics. "That is to say the government has responded to the combined

pressure of the opposition parties and those results are positive."

If the budget finally passes, it would mean the

solution of a political crisis that started at the end of last year. Following

the Conservatives' poorly received economic update last fall, the Liberals and

NDP proposed forming a coalition government, to be supported by the Bloc

Quebecois. The oppositions had accused the government of being negligent in

dealing with the economic crisis.

The opposition parties threatened to vote down the

Conservatives in a confidence vote that was scheduled for December. Prime

Minister Stephen Harper had to request Governor General Michaelle Jean to

prorogue the Parliament until the end of January.