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HIGHLIGHTS-Reuters interview with Canadian prime minister

OTTAWA, June 21 (Reuters) - Canadian Prime Minister Stephen Harper told Reuters on Monday he welcomed China’s move to let its currency become more flexible but would wait to see what the results are before passing final judgment. [ID: N21249551]

Following are highlights from Harper’s interview with Reuters:

ON CHINA’S FOREX MOVE

“The proof will be in the pudding over time but I think it’s fair to say this is a very positive announcement by China. More broadly it does show China not simply doing some positive things, but China assuming a more global view.”

“I think we know that whatever happens, you’re not going to see the American consumer or the Western consumer leading growth the way (they have) over the past decade. And so I think China dealing with the exchange rate issue is a positive signal in that direction.”

“For Canada I should mention that this is particularly promising because as you know, Canada ... has been shouldering quite a disproportionate burden of exchange rate depreciation of some of our fellow Western countries. And as the (Bank of Canada) governor has said, this entails quite significant risks for the Canadian economy going forward.”

When asked whether China’s yuan move will be discussed at the G20 summit at the end of this week: “Well, broadly speaking, we’ll be discussing this framework for strong, sustainable and balanced growth ... (one G20 target is) to encourage the growth of domestic demand, particularly in emerging economies. So I think this fits under that broad framework. I’ve never wanted to focus strictly on one country or strictly on one issue but it’s an important part of seeing emerging economies increase domestic demand, which is a big part of the puzzle going forward.”

When asked whether the G20 summit will put pressure on China to give more of a commitment to let the yuan strengthen: “This is always an issue of discussion, I think there will be some discussion around that, but as I said, I think people will be looking to see what actually happens going forward.”

ON SOVEREIGN DEBT

“In the short term we need to continue to deliver stimulus ... we are not suggesting the early or premature termination of that.”

“We’re starting to see interest rates creep up in some countries, even a little bit in Canada, and that’s a signal that people have to take a look at their debt stock. If your debt stock is enormous, even a small interest rate increase could have quite serious effects on growth.”

“I think that what markets are looking for is that we understand that we have to continue to deliver stimulus now but that in the mid-term countries, particularly highly indebted countries, have got to have credible plans to bring their fiscal houses in order. So it’s a balancing act.”

ON A LETTER HARPER SENT TO G20 LEADERS SUGGESTING COUNTRIES CUT THEIR DEFICITS IN HALF BY 2013 AND STABILIZE, OR START REDUCING, THEIR DEBT-TO-GDP RATIOS BY 2016

“The targets set out in my letter are probably minimalist. These are the things that at a minimum advanced countries are going to have to achieve.”

ON FINANCIAL SECTOR REFORM

“Actually (the Basel process) is being implemented quite aggressively, to the point where many in the financial sector are worried about the speed.”

“I do think it’s going forward but I do think we do have to have a good discussion (at the G20) and a good statement to make sure we’re sending pretty clear signals that we’re going to hit the timelines and there’s going to be some degree of coordination around this. That’s not to say that everybody is going to have a system that is identical in nature. Canada has never advocated that.”

“There has to be sufficient commonality and sufficient peer oversight that there can be faith in the valuation of assets and in the trades among the various banking sectors going forward.”

ON WHETHER HE WANTS AN ELECTION SOON

“It continues to be my strong view that the Canadian people want us, want the government, want Parliament to focus on the economy. That’s what we’ve been doing. And as long as we can get from Parliament what we need from Parliament in terms of the economy, then I think it’s important that Parliament continue to sit, that Parliament continue to work. I don’t think people are looking for an election.”

“All of the opposition parties have at one time or another been threatening to bring down the government or threatening an election ... I don’t think that’s where peoples’ heads are at. I think people want this government to focus on the economy and that’s what we’re going to continue doing. So I’m not looking to have an election in the fall and I don’t think that’s what Canadians are expecting us to do either.” (Reporting by David Ljunggren and Louise Egan)

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