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UPDATE 1-Spain package important step towards union- Canada
* Carney, Harper and Flaherty applaud Spanish rescue package
* Flaherty says doesn't solve problem but a step forward
* FSB's Carney urges Europe to continue financial reform
MONTREAL, June 11 (Reuters) - Canada's top policymakers endorsed on Monday the European Union's rescue package for Spanish banks as an important step toward fiscal and financial integration in the euro zone.
Bank of Canada Governor Mark Carney, who is also head of the Group of 20's Financial Stability Board (FSB), told a business conference that the agreement on the weekend will reinforce the monetary union.
"By centralizing bank restructuring, recapitalizing banks with European rather than national resources, moving towards more centralized supervisory oversight and harmonizing deposit insurance, Europe can break the increasingly toxic links between banks and sovereigns," he said.
Prime Minister Stephen Harper also applauded the euro zone move in remarks made at the same conference, and Finance Minister Jim Flaherty followed suit in Ottawa.
"I am encouraged. We've been urging them for a long time to get moving on this issue," Flaherty told reporters in Ottawa. "This doesn't solve the problem, but it's a step in the right direction."
As chairman of the FSB, a regulatory task force for the G20 top economies, Carney has said it was important not to let up on financial improvements.
"This financial reform agenda can be combined with bold steps in Europe to rebuild the single European financial market on a more robust foundation, and bold steps are now under consideration, such as current proposals to create a banking union," he said.
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