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Canada’s experience in the 1990s should serve as a model for reducing public spending

Montreal, February 4, 2010 – With one month to go before the next federal budget is submitted, a joint publication by the Brussels-based Institut économique Molinari and the Montreal Economic Institute presents Canada’s management of public finances in the 1990s as a model for France and the other developed countries. Canada’s federal government managed to achieve a balanced budget in particular by reducing public spending and by cutting the number of civil servants.

“Unfortunately, at the current pace, a decade of efforts by Canada to balance its budget and repay its debt, from 1997 to 2008, will be offset by three years of deficits,” said Valentin Petkanchin, research director of the Institut économique Molinari and co-author of the publication.

In the 1990s, facing one of the highest debt levels among OECD countries, the federal government was able to curb its spending.

  • Between the 1993-1994 and 1996-1997 fiscal years, program spending – excluding debt service – fell by 12.7%.
  • From 1994-1995 to 1997-1998, the average number of federal public sector employees declined by 16.7%.
  • The net per-capita federal debt, adjusted for inflation, was down by about 40% in 2008 from its 1996 threshold.
  • Whereas debt service swallowed 38% of federal government revenues in 1990-1991, this proportion had fallen to 13.3% in 2008-2009.

“Canada must now seek inspiration from its own example,” stated Germain Belzile, an associate researcher at the Montreal Economic Institute and the second co-author of the publication.

The publication, titled Think twice before going deeper into public debt: lessons from the Canadian experience, may be consulted free of charge on our website.

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The Montreal Economic Institute is an independent, non-partisan, non-profit research and educational organization. Through studies and conferences, the MEI informs public debates in Quebec and Canada by suggesting wealth-generating reforms based on market mechanisms.

The Molinari Economic Institute is a research and educational organization. It endeavours to promote an economic approach to the study of public policy issues. Its mission is to suggest innovative solutions in order to foster prosperity for all members of society.

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Information and interview requests: Ariane Gauthier, communications coordinator, Montreal Economic Institute, Phone: 514 273-0969 ext. 2231 / Email: agauthier (@iedm.org)

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