Canada PM plays to voters in G20 bank tax debate

Reuters – U.S. Edition
Louise Egan
Tuesday, May 18, 2010

OTTAWA (Reuters) – Canadian Prime Minister Stephen Harper is leveraging his position as G20 host this year to preempt a new push for a global bank tax by his peers, and perhaps also win some political points at home.


Four of Harper’s cabinet ministers fanned across the globe on Tuesday to deliver coordinated speeches in Mumbai, Shanghai, Washington and Ottawa, all of them slamming the bank tax proposals that Germany, France and Britain favor.


The grandstanding, nearly six weeks before the Toronto G20 summit, plays well at home. Harper’s government has loudly protested proposals for a global bank tax, arguing that strong regulations kept Canadian banks sound through the global financial crisis, and other nations should follow its example.


The minority government, always with an eye on the next election, is hoping to tap into a rare bout of national pride over the domestic banking system, which needed no government bailout funds during the world financial crisis.


“It’s possible that there is an element of playing to the gallery… It’s a minority government and I think they want to impress on Canadians that Canada is well-managed,” said Daniel Schwanen, deputy executive director of programs at the Centre for International Governance Innovation.


“Some of the G20 countries will at least continue to press for some of the proposed (bank tax) models to see the light of day,” he said.


Being host of the first of two G20 summits gives Harper a chance to shine before his domestic audience: he can flex more diplomatic muscle than he normally would, and he has a good chance of winning on the bank tax issue.


That may dampen criticism that his government lacks clout and leadership on the world stage.


Harper has been in power since 2006 and won a strengthened minority in October 2008, but has not won a substantial enough lead over his rivals to justify going to the polls again.


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The Group of 20 developing and developed economies agreed last year to toughen global banking rules to make another meltdown less likely, focusing on capital and leverage standards. Britain, Germany and France want to take that a step further and impose a tax that would pay in advance for future bailouts and let taxpayers off the hook.


Finance Minister Jim Flaherty tried to rally G20 members like Australia and India in opposing the idea. He took his anti-tax campaign to a G20 meeting in Washington last month and achieved what the Canadian delegation considered a coup — the final communique had no mention of a bank tax despite strong support for the issue from some Europeans.


So why is Harper reviving the debate if it’s already clear there is no consensus?


“All you have to do is stand up and say ‘we’re the best in the world’ and that makes a certain number of electors quite comfortable and very proud of themselves,” said Thomas Mulcair, a legislator from the left-leaning New Democratic Party.


The main opposition party, the Liberals, accuse Harper of setting up a straw-man on the bank tax issue to divert public attention from more prickly debate over his G8 maternal health policy that excludes abortion funding.


But Harper, an astute strategist, also likely sees signs other leaders want to put the bank tax proposal back on the G20 agenda and wants to scrap that before the ideas gain traction.


“Everything … suggests that Europeans, France especially, are still interested in a tax and this is the biggest division right now between Europe and ourselves,” said Fen Hampson, professor of international affairs at Carleton University. “The debate continues and G20 is not in agreement.”


Germany has said it will raise the issue when finance ministers meet in Korea in June and at the June 26-27 summit.


“At the end of the day, Canada is likely to prevail and if Europeans push too hard they will lose,” said Hampson.