Finance Minister Flaherty urges Europe to fix debt

The global economy is at risk of falling into a second recession if European leaders don't resolve the debt crisis soon, Finance Minister Jim Flaherty said Wednesday.

"The European crisis is the world's most immediate and pressing problem," Flaherty said at a Canada-U.S. Securities Markets Summit in New York.

"It threatens the strong, sustainable and balanced growth that the G-20 countries have made their priority."

Repeating a message he had for leaders at the recent IMF meetings in Washington, Flaherty saidit's ultimately up to European leaders to come up with a fix.

But he urged them to expand the bailout fund soon and make a final decision on how they will help Greece and whether the debt-ridden country needs to restructure its debt.

A restructuring of Greece's debt could help the eurozone "move on," he said.

"If this crisis is left unaddressed it will eventually become too big for Europe to solve," Flaherty warned.

He blamed the spreading debt crisis on the slow response from European leaders.

"This crisis could have been averted a year ago. This crisis could have been averted before it threatened global growth," Flaherty said.

Flaherty said that any plan must be clear and decisive.

"If the markets understand that Europe has a clear and comprehensive plan....the markets will support Europe on its path to recovery."

With the European, Chinese and other global economies slowing, demand is dropping for Canadian oil, copper, grain, chemicals, wood and other resources that have underpinned the country's export sector for years.

That will likely lead to weaker job growth, which could make it more difficult for Canada's 1.4 million unemployed to get jobs and lower the 7.3 per cent unemployment rate.

Flaherty said Canada is recovering "faster than most" countries from the 2008-2009 recession. He cited the country's stable financial sector and the fact that not a single bank failed during the recession.

Flaherty added that unlike the U.S., Canada has a strong housing market thanks to "prudent lending practices" by the country's banks.

Canadian banks avoided the sub-prime mortgage lending mess that battered the American housing market and continues to keep housing prices depressed and foreclosures high in the United States.