* Flaherty quits Cabinet, will return to private sector
* Natural Resources Minister Joe Oliver reported to be
* Flaherty says decision not related to his rare skin
(Updates with report of new finance minister, details)
By Louise Egan and Randall Palmer
OTTAWA, March 18 Canada's Jim Flaherty, the
long-serving Conservative finance minister who helped steer the
economy through the global financial crisis, resigned from the
cabinet on Tuesday, leaving the country on track to balance its
books by 2015.
Flaherty, 64, ends the third-longest stint as finance
minister in the country's history. He has been suffering acutely
from a rare skin disease, though he denied his resignation had
anything to do with health.
"Yesterday, I informed the Prime Minister that I am
resigning from Cabinet. This was a decision I made with my
family earlier this year, as I will be returning to the private
sector," he said in a statement accompanied by a picture of him
standing at an office door waving goodbye.
Analysts said Canada's Conservative government was likely to
stick with the plan to balance the budget next year, but there
was less certainty about who would succeed Flaherty and how the
government would spend surpluses projected for coming years.
Canada's public broadcaster CBC reported that Natural
Resources Minister Joe Oliver would succeed Flaherty, without
citing sources. Prime Minister Stephen Harper's chief spokesman,
Jason Macdonald, declined to comment on the report.
Two government sources, who declined to speak publicly
because of the sensitivity of the issues, told Reuters earlier
on Tuesday that they believed Oliver was the best candidate for
the job because of his extensive financial industry expertise
and because he represents a district in the politically valuable
Oliver is currently the government's main proponent of
TransCanada Corp's controversial Keystone XL pipeline
to the United States.
Other leading contenders are believed to be Industry
Minister James Moore, Treasury Board President Tony Clement,
Foreign Minister John Baird and Employment Minister Jason
Kenney, who all share a conservative fiscal policy in line with
Moore has been deeply fiscally conservative at the cabinet
table and Employment Minister Kenney is seen as an
independent-minded social conservative.
A strike against Kenney is that he is from Alberta, the same
province as Harper, who is thought to prefer a minister from
Ontario to help him win votes there ahead of the 2015 election.
Moore is from the Western province of British Columbia.
Foreign Minister Baird is deeply engaged in the Ukraine
crisis. Treasury Board President Clement is believed to aspire
to succeed Harper, which may make the current prime minister
less likely to choose him.
Flaherty, a lawyer, is an outspoken man who was quick on his
feet in parliamentary debates and was equally comfortable
picking a fight or cracking a joke. He has been at the side of
Prime Minister Stephen Harper ever since the Conservatives took
power in 2006.
He cut business and sales taxes, raised spending to
stimulate the economy and put through a record deficit in
nominal dollar terms to counter the recession. But as the
economy recovered, he cut government operations in a quest to
drive that deficit to zero.
Amid speculation he might step aside to attend to his
health, Flaherty stubbornly and repeatedly vowed to stay on the
job until the budget was balanced. The budget plan he presented
last month shows that will be achieved next year.
Flaherty said for the first time last month in an interview
with Reuters that he might not run for re-election.
He will remain a member of Parliament for now.
NO POLICY CHANGE EXPECTED
Financial market players took the news in stride, as few
expect any significant shift in fiscal policy by his successor.
"We know nothing that would suggest that there's any schism
between himself and anybody else in the party on policy, so I
would say that this is not policy related," said Mark Chandler,
economist at the Royal Bank of Canada.
Doug Porter, deputy chief economist at BMO Capital Markets,
said Flaherty's exit was expected, though not this soon.
He said markets were hoping for continuity.
"Whoever steps into the role, they don't have to be a carbon
copy of Mr. Flaherty, nobody could be, but in terms of the broad
policy thrust I think it was appropriate from a policy
perspective, and most people would like to see that continue,"
Porter said there might be a "ripple" in the Canadian
dollar, but that he saw no major implications.
EYEING THE EXIT
Flaherty presented his last budget on Feb. 11. It charted a
path to surplus by cutting back spending on public sector health
care plans, which came on top of other cutbacks and salary
freezes introduced in previous years.
The deficit has gradually narrowed since the 2008-09
recession, helped by economic growth and lower-than-expected
With the fiscal house in order, there were hints in recent
months that Flaherty was eyeing the door.
He began to stray from the Conservative Party script in his
public comments. The Conservatives pledged in 2011 that once the
budget is balanced, they would let couples with children reduce
taxes by sharing their income for tax purposes. Flaherty
surprised political observers in February when he said he wasn't
sure the measure would benefit society overall.
"If the Conservatives are to secure another victory once
they balance the budget, the question that remains open is how
is it going to be spent? So whoever's coming in will be,
definitely, a big part of that discussion," said economist
At a press conference following a meeting of G20 finance
ministers in Sydney, Australia, Flaherty appeared disengaged
from the broader international agenda and focused solely on
Canadian fiscal issues.
Harper said he accepted Flaherty's resignation "with great
reluctance" and praised him for having a steady hand throughout
Flaherty kept a grueling schedule prior to 2013,
crisscrossing the country and traveling abroad to promote the
government's agenda and speaking to reporters once a week or
He revealed a year ago that he is battling a rare skin
disease that causes painful blisters on the body. The condition
is incurable but can be managed with powerful medication that
has unpleasant side effects, including weight gain and mood
He has dramatically scaled back his activities and often
appeared red-faced and short of breath, walking very gingerly
and wincing occasionally. During travel, his staff went to great
lengths to minimize his walking and avoid stairs.
But he was uncomfortable talking about the issue, according
to sources close to him, and on Tuesday denied that his health
played a role in his resignation.
"I am happy to report that I am on the road to a full
recovery and the decision to leave politics was not related in
any way to my health," Flaherty said.
"This decision was made because it is the right one for me
and my family at this time."
(Additional reporting by Randall Palmer, Leah Schnurr, Andrea
Hopkins, Allison Martell and Solarina Ho; Editing by Phil
Berlowitz, Jeffrey Hodgson, Peter Henderson and Eric Walsh)