Sept 30 Canada's governing Conservatives look
reasonably secure for the next four years after their
convincing victory in the May 2 election, although the
uncertain world economy is a big worry.
The next federal election is due in October 2015. This
means Prime Minister Stephen Harper can focus on a low-tax
tough-on-crime agenda as well as an economy that is heavily
reliant on currently weak U.S. markets.
WEAK OPPOSITION PARTIES
Canada's two main opposition parties are operating under
interim leaders, raising questions both about their future and
about their ability to challenge the right-of-center
The left-leaning New Democrats, the main opposition party,
are looking for a new chief after the sudden death in late
August of party leader Jack Layton, easily the most charismatic
federal politician in Canada.
His death raises questions about whether the NDP might
merge with the centrist Liberals, who have governed Canada for
longer than any other party but fell to distant third place in
the May election. The Liberals are split over the idea.
The Conservatives are pressing ahead with a series of
policies designed to cut crime and red tape as well as boosting
competition for services. This includes plans to strip the
Canadian Wheat Board of its marketing monopoly next year
The government also wants changes in the telecom sector and
will not reappoint the current chairman of the federal
communications regulator to a new term after clashes over
Internet billing and foreign telecom investment.
Ottawa is also cracking down on unions, making clear it is
ready to pass back-to-work legislation quickly in case of
What to watch for:
* How well will a distracted opposition be able to fight
the government's agenda?
* Will the New Democrats stay together during a leadership
race? Will the NDP manage to find a leadership candidate with
the same level of charisma and political skill as Layton?
* Will the Liberals and New Democrats hold serious talks
about merging? If there was a deal, could the new party beat
the Conservatives in 2015?
* Will there be increasing public unhappiness about the
Conservatives' moves to quickly implement their agenda?
ECONOMY AND RECOVERY
The Canadian economy is acutely vulnerable to U.S.
political and economic turbulence and the government says it is
ready to launch a new program of stimulus spending in case of a
new global shock. [ID:nS1E78R1MS]
Officials predict Canada can avoid slipping back into
recession but are anxious about the fallout from the the
European debt crisis. [ID:nS1E78M20M]
The crucial export sector is sluggish, hit by a strong
Canadian dollar and weak U.S. demand. The economy is showing
signs of life after shrinking in the second quarter.
Exporters are feeling some relief after the Canadian dollar
- which for months was worth more than its U.S. counterpart -
slipped below parity and then hit 12-month lows against the
The United States is a dominant factor and Ottawa is
worried about President Barack Obama's jobs plan because of
"Buy American" measures that would restrict foreign companies
from participating in infrastructure projects. [ID:nS1E78D12T]
Canadian business are hoping to benefit from the planned
Keystone XL pipeline to the United States but it could be many
years before it is built. [ID:nS1E78Q1M6]
The Bank of Canada has kept interest rates very low, and
made clear it will not raise them any time soon. This has
prompted some analysts to fret about a possible housing
Canada's banking watchdog is increasing its scrutiny of the
consumer loan sector to make sure banks do not lower their
standards to boost lending volumes. [ID:nS1E78P109]
The budget watchdog says the finances of the federal
government and the 10 provinces are unsustainable over the long
term and they will need to either raise taxes or cut spending,
in part because the population is aging. [ID:nS1E78S0GR]
What to watch for:
* How strong is the U.S. recovery? The United States
traditionally takes almost three-quarters of Canadian exports.
How badly would a new U.S. recession hit Canada?
* What effects would a European debt crisis have
* How much money would Ottawa be prepared to spend on a new
stimulus program and how would that hinder efforts to eliminate
the budget deficit by 2014-15?
* What, if anything, will the government or the Bank of
Canada to do fend off a housing bubble? If housing prices
collapse, what would that do to the economy?
* How long will the Canadian dollar stay below the U.S.
* When will the Bank of Canada start raising rates again?
* What effect could a new round of "Buy American"
* When will the Keystone XL be built?
In Quebec, the main separatist party is in trouble and
Ottawa has moved to ease a long-term irritant by signing a tax
harmonization deal with the province's pro-federalist Liberal
In Ontario, Canada's most powerful province, the ruling
Liberals are virtually tied with the opposition Conservatives
and may win only a minority government in the Oct. 6 election.
(Reporting by David Ljunggren; editing by Rob Wilson)