Sunday, December 07, 2008


Mr. Sore Loser

There are losers and there are sore losers.

The uncharacteristic turmoil of last week in the otherwise fairly tame Canadian political landscape gives us a taste of things to come. It was the Conservative government’s economic proposals of the week before that have provoked the full-scale rebellion of the opposition. Presenting the fiscal update in the tradition of a government that has valued cautious, prudent spending over grand bailouts, Finance Minister Jim Flaherty offered a relatively frugal stimulus package to boost the ailing Canadian economy, refusing thereby to follow the footprints of the American Congress and the Barack Obama Administration to come.

But the real spark that has incensed the Liberals – and most specifically their leader, Stephane Dion – was Mr. Flaherty’s announcement of cuts to a public fund for political parties. This cut was not entirely unforeseen following the Democratic Party’s own tally in the United States that Barack Obama’s election cost some USD 730 millions, and considering that in the wake of the general economic slowdown that has affected and is afflicting all Western governments to various degrees, the general idea is to reduce what is aptly termed "spending waste" – especially political spending waste.

Frugality, however, is not a term in Mr. Dion’s vocabulary if the end result affects his political agenda and own personal goals and ambition. The main reason for the anger of the liberal leader was the elimination of federal political subsidies, as this would have disproportionately worsened the financial situations of the opposition parties compared to the Conservatives; the Conservative Party received 37 percent of their funds from Crown funding in 2007, the NDP 57 percent, the Liberals 63 percent, the Green Party 65 percent and the Bloc Québécois 86 percent. Recent polling by Ipsos-Reid found that 61 percent of Canadians wants political subsidies eliminated.

Labeling the removal of public funding to parties as an “attack against democracy”, the opposition threatened to topple the weeks-old government: they would vote against the fiscal update, the defeat of which would be considered a vote of non-confidence in the newly formed Conservative minority government that would bring it down. And this notwithstanding the announcement by the Conservatives on November 29, 2008, that the plan to eliminate the political party direct subsidy would be dropped. And, of course, Stephane Dion would be appointed “interim”Prime Minister until the time he would resign as Liberal leader this coming May.

As it turns out, Governor General Michaelle Jean has agreed to “prorogue” the current session of Parliament until January 26, 2009 at the request of Prime Minister Stephen Harper. To “prorogue” parliament means to discontinue a session of parliament without dissolving it. Various prorogation scenarios were possible: one was a long-term prorogation, lasting up to a year, while another was a short prorogation period lasting a few weeks to a few months. Each would delay any parliamentary activity regarding bills, hence a motion of non-confidence could not be registered and the Conservative government would continue.

The economic implications of all this political drama are huge, especially as they relate to big ticket items such as real estate.

For one thing the very idea of national unity has been damaged, with Westerners who were never favorably disposed to the Liberals accusing them of trying to dislodge their Conservative government, and with Quebecers feeling that they have no business in governing Canada. And this does not reverberate well internationally at a time when large capitals are already looking upon North America as a dismal place to invest.

This theme was re-affirmed by Gordon Campbell himself, the liberal Premier of British Columbia, who has spoken out against the coalition stating that if their gamble fails, Canada's economic worries will become significantly worse as a result. And Campbell’s own worries in British Columbia would head south considerably, in light of the fact that the Premier will have to call the provincial elections within the first half of 2009 and seeing as to how the left-leaning New Democratic Party (NDP) is already leading the Liberals five points in provincial polls. An NDP win would be a disaster for real estate, recession or not.

And then an un-elected “coalition government” headed by Stephane Dion as interim Prime Minister would certainly be put under question by both Canadians and foreigners alike, considering Mr. Dion’s track record as leader of his own political party. Stephane Dion’s leadership quality have been already challenged and put to a test, having just led his own political party to one of the worst electoral defeats ever. And this too would not bode well with investors, especially foreign.

Besides, to see a Stephane Dion sitting in as an un-elected Prime Minister smacks too much of politics Venezuelan style. Anytime Canada’s political stability is diminished both domestically and abroad we all stand to lose in the international arena politically and ethically as a nation, as well as in the economic arena. Canada is too dependent upon its reputation as one of the best places on Earth to conduct business to afford ‘coup d’etat a la Dion’, and in light of this Mr. Dion has done a great disservice to the country.

Real estate specifically, as among other business, stands to suffer from the reverberations of all this political drama. The capital appreciation we all have enjoyed this past few years is the direct, proximate result of the international image of Canada as a politically stable society and a serious and resourceful economic partner. This in turn has attracted foreign investments and capital that have contributed to the unprecedented development of various sectors of the economy with real estate in the forefront.

We can hardly afford now to have politicians the likes of Mr. Dion satisfying their own political ego and ambitions by putting their own interest and personal agenda over and above the national interest.

Luigi Frascati

Real Estate Chronicle



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