The Greek government has made a sound decision to hold a referendum on the European Union financial rescue plan, Bank of Canada Governor Mark Carney told a parliamentary committee here Tuesday.
Carney said the Greek government will need widespread public support to implement what he called "tough decisions" that the Greeks will need to make if the Eurozone rescue plan is to work. Austerity measures taken by the Greeks have already been met with riots and tax-dodging.
"If it's the judgment of the Greek government that this is the best approach to validate that support, we fully respect that," Carney told the House of Commons Finance Committee Tuesday.
Canada's own financial situation is somewhat troubling. At about the same time Carney was testifying, Parliamentary Budget Officer Kevin Page, who monitors government spending, said the Canadian government has about a 10-percent chance of balancing its books by 2014.
Prime Minister Stephen Harper made that pledge in last spring's election campaign.
Page's Economic and Fiscal Outlook, released Tuesday, predicts Canada's federal operating deficit will be 18.7 billion Canadian dollars in fiscal 2014-15, 13.1 billion in 2015-16 and 7.3 billion in 2016-17.
At Tuesday's parliamentary committee meeting, Carney predicted short recessions for the United States and the eurozone. Recent Bank of Canada reports predict slower growth for Canada, but no recession.
However, Carney said he can't anticipate the measures the U.S. Congress will take to prop up the economy as the United States enters an election year.
Carney said the economic health of the West depends on the success of European austerity measures. He told the parliamentarians he is optimistic that the Europeans will succeed, but that they will need to fix fundamental underlying economic problems in the Eurozone.
That process won't save them from a recession, Carney said.
"Our expectation for the measures that are being taken by European authorities is that they will contain the crisis, but that's different than resolving the issues. Resolving the issues is going to take years, and there may need to be additional steps in the near term in order to ensure containment," he said. Enditem (1 U.S. dollar = 1.014 Canadian dollars)