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Economy

Canada’s federal government disregards its own fiscal rules—unlike Sweden

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5 minute read

From the Fraser Institute

By Grady Munro and Jake Fuss

During the 1970s and 1980s, Canada and Sweden both saw a deterioration in government finances. However, hard times in the early 1990s transformed the approach to fiscal policy by governments in both countries, including reducing spending and borrowing, and ultimately returning to balanced budgets. While Swedes have carried on the legacy of fiscal responsibility in subsequent decades, Canadians seem to have forgotten the hard lessons of recent history and have fallen back on the fiscal approach that got us into trouble in the first place.

In his recent book, Swedish economist Johan Norberg explains that for most of its modern history Sweden has been a testament to the success of the free market, rather than a model socialist economy. The country only experimented with socialism for a short period, with disastrous results.

Sweden’s socialist experiment during the 1970s and 1980s saw substantial income redistribution and the introduction of a large welfare state. As a result, the size of government doubled as a share of the economy (measured by GDP). Yet despite increases in taxes, particularly targeting corporations and the wealthy, the government could not raise the funds to pay for such a sizable expansion of the welfare state. Instead, Sweden ran deficits in every year from 1970 to 1987, government debt rose from less than 18 per cent of the economy (GDP) in 1970 to over 70 per cent in 1985, and the private sector completely stagnated.

This approach brought about a financial crisis in the early 1990s that saw interest rates briefly rise as high as 500 per cent. In the wake of this crisis, the Swedish government declared the socialist experiment a failure, and the country saw substantial reform that emphasized balanced budgets, lower taxes, and an open business environment. Rules were set in place to ensure fiscal discipline, and as a result the country has enjoyed consistent surpluses and government debt has fallen from 83.2 per cent of the economy in 1998 to 58.8 per cent in 2021, despite still maintaining a large welfare state.

During the 1970s and 1980s, Canada also experienced a deterioration in government finances. Canada’s issues stemmed from a substantial expansion in the size and role of government in conjunction with rising interest rates. The federal government ran uninterrupted budget deficits from 1970 through to the mid-1990s. Federal government debt rose to over 70 per cent of GDP during this period and debt interest costs were consuming more than one-third of federal government revenues.

By the early 1990s federal finances were in shambles and the economy was stagnant. A new federal government was elected, led by Jean Chrétien, which implemented significant fiscal reform in 1995 based on spending restraint, balanced budgets and lower taxes. The provinces enacted similar reforms, and from the late 1990s through the 2000s, Canadians enjoyed consistent surpluses, debt reduction, and strong economic growth.

While there are clear parallels between the countries, unlike Sweden, Canadians has since reverted back to the risky fiscal approach of the 1970s and 1980s. Since 2015, Canada has seen historically high federal spending, and a string of federal and provincial budget deficits. Consequently, government debt and its associated costs have grown substantially.

Since the 1990s, both Canada and Sweden have had fiscal rules in place to help ensure the health of government finances. But while the Swedish government has largely stuck to its surplus goal by being disciplined with finances, Canada’s current federal government has consistently disregarded its own commitments. Indeed, it has violated its own fiscal anchors several times since 2015, and rather than adopt the discipline necessary to get back on track, the government simply moves the goalposts.

Simply put, Swedes have learned their lesson from their experience in the 1970s to 1990s, whereas Canadians appear to have forgotten. This raises the question—do Swedes have better memories?

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Alberta

Alberta’s grand bargain with Canada includes a new pipeline to Prince Rupert

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From Resource Now

By

Alberta renews call for West Coast oil pipeline amid shifting federal, geopolitical dynamics.

Just six months ago, talk of resurrecting some version of the Northern Gateway pipeline would have been unthinkable. But with the election of Donald Trump in the U.S. and Mark Carney in Canada, it’s now thinkable.

In fact, Alberta Premier Danielle Smith seems to be making Northern Gateway 2.0 a top priority and a condition for Alberta staying within the Canadian confederation and supporting Mark Carney’s vision of making Canada an Energy superpower. Thanks to Donald Trump threatening Canadian sovereignty and its economy, there has been a noticeable zeitgeist shift in Canada. There is growing support for the idea of leveraging Canada’s natural resources and diversifying export markets to make it less vulnerable to an unpredictable southern neighbour.

“I think the world has changed dramatically since Donald Trump got elected in November,” Smith said at a keynote address Wednesday at the Global Energy Show Canada in Calgary. “I think that’s changed the national conversation.” Smith said she has been encouraged by the tack Carney has taken since being elected Prime Minister, and hopes to see real action from Ottawa in the coming months to address what Smith said is serious encumbrances to Alberta’s oil sector, including Bill C-69, an oil and gas emissions cap and a West Coast tanker oil ban. “I’m going to give him some time to work with us and I’m going to be optimistic,” Smith said. Removing the West Coast moratorium on oil tankers would be the first step needed to building a new oil pipeline line from Alberta to Prince Rupert. “We cannot build a pipeline to the west coast if there is a tanker ban,” Smith said. The next step would be getting First Nations on board. “Indigenous peoples have been shut out of the energy economy for generations, and we are now putting them at the heart of it,” Smith said.

Alberta currently produces about 4.3 million barrels of oil per day. Had the Northern Gateway, Keystone XL and Energy East pipelines been built, Alberta could now be producing and exporting an additional 2.5 million barrels of oil per day. The original Northern Gateway Pipeline — killed outright by the Justin Trudeau government — would have terminated in Kitimat. Smith is now talking about a pipeline that would terminate in Prince Rupert. This may obviate some of the concerns that Kitimat posed with oil tankers negotiating Douglas Channel, and their potential impacts on the marine environment.

One of the biggest hurdles to a pipeline to Prince Rupert may be B.C. Premier David Eby. The B.C. NDP government has a history of opposing oil pipelines with tooth and nail. Asked in a fireside chat by Peter Mansbridge how she would get around the B.C. problem, Smith confidently said: “I’ll convince David Eby.”

“I’m sensitive to the issues that were raised before,” she added. One of those concerns was emissions. But the Alberta government and oil industry has struck a grand bargain with Ottawa: pipelines for emissions abatement through carbon capture and storage.

The industry and government propose multi-billion investments in CCUS. The Pathways Alliance project alone represents an investment of $10 to $20 billion. Smith noted that there is no economic value in pumping CO2 underground. It only becomes economically viable if the tradeoff is greater production and export capacity for Alberta oil. “If you couple it with a million-barrel-per-day pipeline, well that allows you $20 billion worth of revenue year after year,” she said. “All of a sudden a $20 billion cost to have to decarbonize, it looks a lot more attractive when you have a new source of revenue.” When asked about the Prince Rupert pipeline proposal, Eby has responded that there is currently no proponent, and that it is therefore a bridge to cross when there is actually a proposal. “I think what I’ve heard Premier Eby say is that there is no project and no proponent,” Smith said. “Well, that’s my job. There will be soon.  “We’re working very hard on being able to get industry players to realize this time may be different.” “We’re working on getting a proponent and route.”

At a number of sessions during the conference, Mansbridge has repeatedly asked speakers about the Alberta secession movement, and whether it might scare off investment capital. Alberta has been using the threat of secession as a threat if Ottawa does not address some of the province’s long-standing grievances. Smith said she hopes Carney takes it seriously. “I hope the prime minister doesn’t want to test it,” Smith said during a scrum with reporters. “I take it seriously. I have never seen separatist sentiment be as high as it is now. “I’ve also seen it dissipate when Ottawa addresses the concerns Alberta has.” She added that, if Carney wants a true nation-building project to fast-track, she can’t think of a better one than a new West Coast pipeline. “I can’t imagine that there will be another project on the national list that will generate as much revenue, as much GDP, as many high paying jobs as a bitumen pipeline to the coast.”

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Business

Carney’s European pivot could quietly reshape Canada’s sovereignty

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This article supplied by Troy Media.

Troy Media By Isidoros Karderinis

Canadians must consider how closer EU ties could erode national control and economic sovereignty

As Prime Minister Mark Carney attempts to deepen Canada’s relationship with the European Union and other supranational institutions, Canadians should be asking a hard question: how much of our national independence are we prepared to give away? If you want a glimpse of what happens when a country loses control over its currency, trade and democratic accountability, you need only look to Bulgaria.

On June 8, 2025, thousands of Bulgarians took to the streets in front of the country’s National Bank. Their message was clear: they want to keep the lev and stop the forced adoption of the euro, scheduled for Jan. 1, 2026.

Bulgaria, a southeastern European country and EU member since 2007, is preparing to join the eurozone—a bloc of 20 countries that share the euro as a common currency. The move would bind Bulgaria to the economic decisions of the European Central Bank, replacing its national currency with one managed from Brussels and Frankfurt.

The protest movement is a vivid example of the tensions that arise when national identity collides with centralized policy-making. It was organized by Vazrazdane, a nationalist, eurosceptic political party that has gained support by opposing what it sees as the erosion of Bulgarian sovereignty through European integration. Similar demonstrations took place in cities across the country.

At the heart of the unrest is a call for democratic accountability. Vazrazdane leader Konstantin Kostadinov appealed directly to EU leaders, arguing that Bulgarians should not be forced into the eurozone without a public vote. He noted that in Italy, referendums on the euro were allowed with support from less than one per cent of citizens, while in Bulgaria, more than 10 per cent calling for a referendum have been ignored.

Protesters warned that abandoning the lev without a public vote would amount to a betrayal of democracy. “If there is no lev, there is no Bulgaria,” some chanted. For them, the lev is not just a currency: it is a symbol of national independence.

Their fears are not unfounded. Across the eurozone, several countries have experienced higher prices and reduced purchasing power after adopting the euro. The loss of domestic control over monetary policy has led to economic decisions being dictated from afar. Inflation, declining living standards and external dependency are real concerns.

Canada is not Bulgaria. But it is not immune to the same dynamics. Through trade agreements, regulatory convergence and global commitments, Canada has already surrendered meaningful control over its economy and borders. Canadians rarely debate these trade-offs publicly, and almost never vote on them directly.

Carney, a former central banker with deep ties to global finance, has made clear his intention to align more closely with the European Union on economic and security matters. While partnership is not inherently wrong, it must come with strong democratic oversight. Canadians should not allow fundamental shifts in sovereignty to be handed off quietly to international bodies or technocratic elites.

What’s happening in Bulgaria is not just about the euro—it’s about a people demanding the right to chart their own course. Canadians should take note. Sovereignty is not lost in one dramatic act. It erodes incrementally: through treaties we don’t read, agreements we don’t question, and decisions made without our consent.

If democracy and national control still matter to Canadians, they would do well to pay attention.

Isidoros Karderinis was born in Athens, Greece. He is a journalist, foreign press correspondent, economist, novelist and poet. He is accredited by the Greek Ministry of Foreign Affairs as a foreign press correspondent and has built a distinguished career in journalism and literature.

Troy Media empowers Canadian community news outlets by providing independent, insightful analysis and commentary. Our mission is to support local media in helping Canadians stay informed and engaged by delivering reliable content that strengthens community connections and deepens understanding across the country.

 

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