Canada's Harper says too early to unwind stimulus

By Randall Palmer

L'AQUILA, Italy (Reuters) - Canada said on Friday it would not have to cut spending or raise taxes to end its budget deficit, but said countries with structural deficits will need to begin thinking about exit strategies.

Speaking after a summit of the Group of Eight leading industrialized nations, Prime Minister Stephen Harper said it was too early to start cutting stimulus but this topic could figure prominently in next year's G8 summit in Canada.

"I am not suggesting that any country begin to unwind its economic stimulus measures now. That would clearly be way too premature," Harper told a news conference.

"I have suggested that those that are seeing the emergence of these structural deficits ... have to at least be thinking about how they are going to emerge out of a structural deficit position as the recovery begins to take hold."

Right now, he said, the global economy was showing greater stability and the severity of the recession was easing. By next June's G8 summit he hoped the recovery would be fully under way and exit strategies could be planned.

Fellow G8 member Germany has expressed concern about too much stimulus, while the United States and Britain have suggested more might be needed.

Harper said Canada entered the recession with a budget surplus and would be back in the black simply because of tax revenues increasing as the economy grew again.

By the end of the 2010-11 fiscal year, he said, he anticipated the Canadian economy would be in full recovery. Typically two years later, tax revenues should recover, but a balanced budget could take longer if the economic recovery were slower.