* Flaherty says all G20 countries very concerned
* Expects 11th hour deal in Washington
OTTAWA Nov 7 Canada will fall into recession if
Washington does not reach a deal by year-end to avert the
so-called fiscal cliff, Finance Minister Jim Flaherty said on
Unless the White House and Congress agree how to cut the
U.S. budget deficit, a $600 billion package of tax increases and
spending cuts kicks in automatically at the end of 2012.
"Were the entire fiscal cliff risk to become reality, the
effect on U.S. GDP, according to the Americans themselves, would
be 4 to 5 percent, which would put the U.S. economy into
recession quite quickly and the Canadian would follow shortly
thereafter," Flaherty told reporters in Ottawa.
"We're all concerned that it's an immediate problem within
the next 60 days that needs to be dealt with."
Flaherty was referring to the Group of 20 leading world
economies, which wants the United States to ensure its budget is
sustainable in the long term "while avoiding a sharp fiscal
contraction in 2013." [ID: nL1E8M5CNL]
Canada recovered from recession faster than the United
States, but its continued expansion relies heavily on the United
States continuing to buy three-quarters of its exports.
As he headed into the G20 meeting on Monday, Flaherty
warned for the first time about a potential recession.
He also said he was confident that whoever won Tuesday's
presidential election would succeed in brokering a deal with
Congress, but not without some brinkmanship.
"They may not deal with it until the 11th hour and the 55th
minute, but I expect that they'll do it just as they dealt with
their banks in 2008," he told reporters. [ID: nL1E8M40RO]