Postmedia columnist Andrew Coyne writes about MLI study on provincial solvency

October 30, 2012 – In a column entitled, “Like Europe, Canada is attempting to run a monetary union without a proper fiscal union,” Andrew Coyne references MLI’s recent study on provincial solvency and federal obligations by Marc Joffe. The column was picked up across Postmedia newspapers across Canada including the National Post, Ottawa Citizen, Montreal Gazette, Regina Leader-Post, Edmonton Journal, Saskatoon’s StarPhoenix, Windsor Star, The Province and Canada.com. It was also picked up on Canada.com and the National Post’s Chris Selley wrote about the study in his Full Pundit review.

An excerpt from Coyne’s column below:

A new study for the Macdonald-Laurier Institute, Provincial Solvency and Federal Obligations, calculates most provinces face a better than 50% probability of default over the next 30 years, based on current trends; for some it’s a near certainty. Perhaps surprisingly, it predicts Alberta is the most likely to default in the long term, while Quebec, though it has the highest current debt load, is the least likely. The reason: Alberta’s population is projected to age the most, while Quebec is least exposed to a collapse in commodity prices.

Yet this variance in risk is not reflected in the interest rates charged on provincial bonds. That may, as the study allows, reflect investors’ confidence that the provinces will take action in time to avert a default: Again, these numbers are based on current trends, i.e. if nothing were done. Or, possibly, it may reflect a more disturbing conjecture: That the federal government would step in to bail out a failing province, if it came to that.

Would it? Should it? Can we afford to allow such expectations to take hold? Or, given the magnitude of the fiscal challenge facing the provinces in the longer term, should we not begin to think about laying down some ground rules for provincial borrowing — to complete the fiscal union our monetary union implies?

 

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Related posts:

  1. MLI study on provincial solvency continues to make waves: National Post article quotes study in article on Alberta balancing its budget November 21, 2012 – MLI’s recent study on provincial solvency was highlighted in a National...
  2. Globe and Mail editorial endorses MLI study on provincial solvency and federal obligations October 26, 2012 – MLI’s study, Provincial Solvency and Federal Obligations, by author Marc Joffe, is...
  3. European style debt crisis could happen here: MLI study MEDIA RELEASE OTTAWA, October 18, 2012 – Canadians shouldn’t be complacent about the European debt...
  4. Philip Cross in the Financial Post: Provincial fiscal follies October 26, 2012 – MLI’s Philip Cross writes about the outlook for provincial debt in today’s Financial...
  5. Marc Joffe and Philip Cross write about the provincial default crisis in the Vancouver Sun, Calgary Herald, The StarPhoenix, Leader-Post, & Chronicle Herald November 1, 2012 – MLI research co-ordinator Philip Cross and author Marc Joffe write about the provincial...

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