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metronews.ca WEEKEND, June 15-17, 2012
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Bank of Canada warning of fallout from EU crisis A nation exposed. Federal regulatory body puts Canadians on alert over instability created by inflated real-estate values, household debt The Bank of Canada conti nues to warn that the high level of household debt and overvalued real estate in this country have left the economy vulnerable if a financial shock erupts in Europe. In its financial system review identifying risks to the economy, the bank noted certain segments of the housing market that have a persistent oversupply — such as condos in Toronto — face a higher risk of a price correction. Using a hypothetical stress test, the bank says a three per cent increase in unemployment — about the same as occurred in the recent recession — would almost triple the proportion of indebted households that would go into arrears. The current rate is currently about half a per cent
and could rise 1.3 per cent under that scenario. A shock would also cut into net worth of Canadians. The bank points out that 40 per cent of household worth is tied to the value of their real estate holdings, compared to only 34 per cent a decade ago. “Markets in Canada have been relatively stable ... nevertheless, a further significant deterioration in global financial conditions could have a considerable impact in Canada through trade, financial and confidence channels,’’ the bank said Thursday its semi-annual financial systems review. In fact, the bank says the spillover effects on Canada’s financial institutions, such as banks, “would be substantial.’’ While the report does not attempt to place odds on the chance of a Europe-centred shock, it judges the risks as “very high.” The dire warning — not altogether unexpected from the central bank given renewed turbulence in Europe, including a possibility that Greece will exit the euro currency zone after Sunday’s elections — gives some urgency to the G20 summit of leaders in Mex-
The ripple effect
The central bank concluded that the risks of a European financial meltdown could ripple around the world. • Dimished growth. Rock-
bottom interest rates would further erode the positions of life insurance companies and pension plans and boost household borrowing.
• A negative feedback
loop. What the central bank is describing is a scenario almost identical to what happened in 2008 when the world was plunged into the worst downturn since the Great Depression.
ico next week, where Europe will be the main topic. In Ottawa on Thursday, Finance Minister Jim Flaherty said non-European countries in the G20 need to keep up the pressure on the Europeans to put up sufficient money to “overwhelm” the problem. The Canadian press
A time for building bridges in Windsor? Vehicles cross the Ambassador Bridge as viewed from Windsor, Ont., Monday, June 1, 2009. Prime Minister Stephen Harper will be in Windsor and across the river in Detroit on Friday amid speculation he will be helping announce a new bridge between the two border cities. About one-quarter of all Canada-U.S. trade currently flows across the Ambassador Bridge. But the bridge is close to 100 years old and bottlenecks are not uncommon. The Ontario Trucking Association is among those who have been eagerly awaiting the announcement of a second bridge. dave chidley|the canadian press
Downsized. Nokia shares The hot seat. British PM goes on the plunge after mass layoffs defensive at phone-hacking inquiry Nokia shares plunged more than 15 per cent Thursday after the Finnish cellphone maker said it would slash 10,000 jobs and close a number of operations, including one in Canada, amid fierce competition in the industry. The Finnish cellphone maker also announced personnel changes and said it has agreed to sell its luxury phone brand, Vertu. The measures, aimed at additional cost savings of $1.6 billion by the end of next year, will shut down research and development facilities in
Ulm, Germany, and Burnaby, B.C., among others The company’s share price plunged more than 7 per cent to $2.69 in morning trading in Helsinki. Nokia has been struggling against fierce competition from Apple Inc.’s iPhone and other makers using Google Inc.’s popular Android software. In April, Nokia announced one of its worst quarterly results ever, blaming tough competition for a $929-million net loss in the first quarter as sales plunged in the smartphone market. The associated press
A confident and unruffled Prime Minister David Cameron on Thursday defended his ill-fated decision to make disgraced tabloid editor Andy Coulson his communications director, even though the news executive had already been tarnished in Britain’s phone-hacking scandal. The leader also defended the conduct of Culture Secretary Jeremy Hunt and the decision to put him in charge of judging Rupert Murdoch’s controversial bid to take full control of the lucrative BSkyB broadcasting company. Hunt has been
accused by critics of being too close to the media mogul and his company, News Corp. Cameron shed light on the cozy relationship he enjoyed with senior Murdoch executives as he tried to wrest control of Britain’s government from the Labour Party before the 2010 general election that brought him to power. In sworn testimony before a U.K. media ethics inquiry, Cameron said he chose Coulson for the key communications post because he wanted a tough man to implement his media strategy in a demand-
ing, 24/7 news environment. Cameron said he had received assurances that Coulson was not personally involved in the phone-hacking scandal — but those proved hollow when Coulson was forced to resign from his senior government post last year after new revelations about widespread wrongdoing while he was top editor at the News of the World. Cameron also admitted seeking the advice of Rebekah Brooks, another former tabloid editor facing criminal charges, before hiring Coulson. the associated press
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