The Day Trudeau Put Canada Into Crisis Mode from Quarantine
Justin Trudeau had 24 hours to transform his governing Liberals from progressive champions to crisis managers.
Canada’s parliament kicked off the week with legislation to ban conversion therapy, a controversial technique used to “turn” LGBTQ people straight. It ended Friday with a coordinated effort to prevent the nation’s economy from tumbling into a recession due to the global coronavirus pandemic.
Trudeau orchestrated the whole thing from his figurative living room. The prime minister has been governing from home since Thursday, after his wife Sophie Gregoire Trudeau tested positive for Covid-19. She contracted the illness, which is threatening to upend the global economy, after speaking at a conference in the U.K.
“I’m feeling good and technology allows me to work from home,” the prime minister told reporters from a safe distance on the front lawn of Rideau Cottage, his secondary official residence. “It is an inconvenience and frustrating — we are social beings after all.” He’s expected to be in self isolation for 14 days, though he said there’s “no point” for him to be tested yet for the coronavirus.
It’s been a week that will define the Canadian leader’s legacy. Trudeau has built a political coalition around an ambitious agenda, from climate change to indigenous rights and pharmacare. If he’s forced to redirect resources, his government could have to abandon issues close to its heart in order to simply keep the economy afloat.
Trudeau’s first move Friday was the effective shutdown of a Group-of-Seven capital city. Not only did opposition lawmakers vote unanimously with the minority government to suspend the legislature, the motion included a provision to pass the new North American trade deal with the U.S. and Mexico. The accord quickly passed through the Senate as well before both chambers shut down until April 20.
Canada was the final holdout on ratifying the agreement after a year and a half of tough negotiation with President Donald Trump’s administration. While lawmakers had previously raised concerns over measures included in the deal, the accord is critical for Canada’s economy because it governs more than $1 trillion worth of commerce across the three countries, home to more than half a billion consumers.
Six top members of Trudeau’s “Team Canada” government, led by Deputy Prime Minister Chrystia Freeland, then announced enhanced checks for travelers at the nation’s borders, a ban on cruise ships with over 500 passenger until July 1 and the limiting of international flights to only a few airports. The country’s chief medical officials warned Canadians to avoid all non-essential travel abroad and consider isolating themselves for 14 days upon returning from a trip overseas.
At the announcement of parliament’s suspension, Government House Leader Pablo Rodriguez also said the federal budget, originally scheduled for March 30, could be delayed.
Next, Trudeau sent Finance Minister Bill Morneau, Bank of Canada Governor Stephen Poloz and Jeremy Rudin, head of the federal banking regulator, to execute a coordinated economic response that included first emergency interest rate cut since the 2008-2009 financial crisis.
“I’m told this is a rare occasion, maybe even a first for the finance minister, the governor of the bank and the superintendent of financial institutions to make a policy announcement together,” Morneau said at a press conference. “These are extraordinary times and that means we’re ready to take extraordinary measures.”
On top of an initial announcement Wednesday of C$1.1 billion ($800 million) to combat the coronavirus, Morneau said the government is ready to spend as much as it takes to keep Canada’s economy afloat. Officials earmarked an additional C$10 billion in credit support for businesses on Friday, to be deployed by federal financing agencies Export Development Canada and Business Development Bank of Canada.
The virus-driven meltdown in financial markets had already forced the Bank of Canada’s hand once this month, when it lowered interest rates for the first time in more than four years at a scheduled decision.
But the collapse in oil prices this week is widely seen to be the tipping point that will push the Canadian economy into recession. In addition to cutting rates a second time, the central bank injected more liquidity into funding markets in a bid to stop the slowdown.
Rudin said the federal financial regulator will lower capital requirements for banks to increase lending capacity by C$300 billion and halt tweaks to mortgage stress test rules.
And a more robust fiscal response is on its way. Trudeau’s government — already running budget deficits — will announce a multibillion dollar stimulus package next week.
“The scale of the response will be against the scale of the challenge,” Morneau said. As of Friday, medical professionals were treating 176 confirmed Covid-19 patients nationwide, with one death, according to Health Canada.
The Conservative Party capitalized on the Canada’s last recession by providing a safe set of fiscal hands, allowing former Prime Minister Stephen Harper to secure his first majority in 2011 after two consecutive minority governments.
Managed correctly, Trudeau could follow a similar path. Emerging from the outbreak with the country relatively unscathed might help the Liberals regain the majority they lost in October’s election.
However, if Canada’s economy tumbles into a long recession and Covid-19 disrupts society for too long, voters could look elsewhere in the next election.
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