OTTAWA (Reuters) - Canada urged its top trading partner, the United States, on Tuesday to steer clear of defaulting on its debt to avoid “disruptions” to the global economy.
Finance Minister Jim Flaherty told reporters he had spoken with his U.S. counterparts in Congress and budget officials in the Obama administration to encourage them to “work something out.”
“This is not just a procedural matter. This has some consequences,” Flaherty told reporters when asked about the possibility of the U.S. missing a debt payment.
“We don’t need any more disruptions in the world economy these days,” he said.
Flaherty will head to New York on Wednesday to give a speech there.
His comments came as U.S. Vice President Joe Biden and a bipartisan group of lawmakers stepped up negotiations to find a deal that would allow Congress to raise the debt ceiling by an August 2 deadline, when the United States could start defaulting on its obligations.
For this year, the U.S. deficit is expected to reach $1.4 trillion.
Canada’s budget deficit is tiny by comparison, at about 2 percent of gross domestic product and Flaherty has promised to return to surplus by 2014-15.
Consumer debt from mortgages has emerged as a bigger concern domestically, and Flaherty warned consumers not to get too deeply into debt when buying a house.
“We need to remind Canadians that historic low interest rates will not be there forever, that interest rates really only have one way to go and that’s up,” he said.
He said there were signs that other forms of consumer credit were abating.
Reporting by Louise Egan; editing by Rob Wilson