May 25, 2009 / 4:01 PM / 11 years ago

UPDATE 1-Canada's Flaherty says country still in recession

* Finance minister sees some positive signs

* Federal, provincial meeting to discuss EI, pensions (Adds quotes, details, changes dateline)

By Louise Egan

MEECH LAKE, Quebec, May 25 (Reuters) - Canadian Finance Minister Jim Flaherty said on Monday the economy was showing positive signs but warned against early predictions of recovery, saying the country was still in recession.

“There are some good signals in the economy but I think we have to be cautious. We are still in the midst of a recession, a fairly deep recession,” Flaherty told reporters prior to a full-day meeting with provincial finance ministers at Meech Lake, Quebec.

Recent Canadian data has shown encouraging evidence of recovery, most recently with Friday’s retail sales report for March, which showed the a third straight monthly increase. [ID:nN21314203] [ID:nN22375954]

One of the first items on the agenda for the meeting was a closed-door briefing by Bank of Canada Governor Mark Carney on the state of the economy.

Provincial ministers are expected to press Ottawa for reforms to employment insurance — a short-term need to help the jobless through the recession — and the longer-term goal of improving pension systems.

Moments after Flaherty spoke, the minority Conservative government announced a C$500 million ($442 million) expansion of its employment insurance program but rejected demands from opposition parties to relax eligibility rules. Liberal leader Michael Ignatieff has threatened a non-confidence vote over the issue. [ID:nN25440736]

Flaherty explained the government’s refusal to introduce laxer eligibility rules by saying the so-called automatic stabilizers in the system already results in more benefits being paid out in tough economic times.

“EI becomes larger in times of economic slowdown ... There is substantially more money being spent on EI in Ontario because of the increased unemployment,” he said.

Dwight Duncan, finance minister of Ontario — the province hardest hit by troubles in the auto industry and manufacturers in general — called for more flexible EI rules.

Speaking before the government’s announcement, Duncan said: “People have to feed their families this week. They can’t wait ... The rules that are in place now were set in a time when the economy was very different, when growth rates were different and I think at the very least they need to be more flexible to respond to the reality of our current situation.”

Duncan also named pension reform as another priority for the meeting. Pensions are inadequate, Canadians are not saving enough for their retirement, and there needs to be more harmonization of pensions across different levels of government, he said.

“There’s a growing consensus among all ministers that we need to look at this,” Duncan said. ($1=$1.13 Canadian) (Editing by Jeffrey Hodgson)

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