Canada may pull its belt even tighter

By , Special to The Christian Science Monitor

In an effort to end Canada's worst economic crisis since the Great Depression of the 1930s, the ruling Liberal government has presented to Parliament an austerity budget calling on Canadians to tighten their belts even more.

The budget is part of an attempt by Prime Minister Pierre Trudeau, who is suffering severe political damage on economic issues, to focus the full weight of the country's leadership on Canada's foundering business situation.

The budget proposed June 28 by Finance Minister Allan MacEachen calls for voluntary wage restraints in the private sector and a 6 percent ceiling on all wage increases for civil servants over the next year. Mr. MacEachen urged Canadians to curb inflation by moving ''from the 12 percent world of recession to the 6 percent world of recovery.''

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In addition to releasing a new budget, Mr. Trudeau has invited the premiers of Canada's 10 provincial governments to an emergency, one-day economic conference June 30.

The budget, which lays out the government's economic program, is traditionally presented once a year. The unusual and somewhat humiliating decision by the Trudeau government, to produce a new one only eight months after the previous budget announcement reflects the deepening sense of economic crisis that has overtaken Canada.

A deluge of bad news in recent weeks has made everyone aware that the country is in its worst postwar business slump. For Mr. Trudeau, the situation represents one of the rockiest periods in his 12 years as prime minister. Many of his own Liberal Party members of Parliament have privately said he should resign to save the party from lasting harm.

''This year's a write-off,'' was the description of the 1982 economic picture by Thomas Maxwell, chief economist at the noted business research group, the Conference Board of Canada. ''We're in a mess and things could get worse,'' he said.

Normally sedate bankers, worried by the widespread bankruptcies caused by a combined business slowdown and the effects of 18 percent borrowing rates, have been raising an urgent alarm.

Bill Mulholland, chairman of the Bank of Montreal, one of the country's largest financial institutions, recently predicted widespread debt problems among many companies, leading to an ''economic collapse'' unless interest rates are lowered.

Most devastating for Mr. Trudeau has been the failure of his government's central economic strategy - keeping domestic borrowing rates high in hopes of driving down inflation and propping up the beleaguered Canadian dollar on foreign exchange markets.

Despite interest rates of 15 percent or higher for more than a year, consumer prices in Canada, unlike those in the United States, have not declined but actually risen. Inflation is currently running at 11.8 percent on an annual basis.

The chief reason is that energy prices, which are government-regulated, have been rising. Also, by holding interest rates high, the government hoped to attract enough inflows of foreign funds to keep the Canadian currency steady on exchange markets. But this strategy has also run into trouble.

In recent weeks, the Canadian dollar plunged to a record-low 76 cents against the US dollar before climbing back to the 78-cent range.

At the same time, the tight-money policy has wrung much of the life from the economy, which is expected to show real growth of minus 2 percent this year.

And 1983 will not be much better, economists say. With business closings and factory layoffs proliferating, 1 in 10 Canadian workers is now jobless. Consumers, uncertain about their jobs and ability to meet unheard-of mortgage payments, have stopped spending. Business investment has also dried up.

Bombarded with challenges to take action or call an election, Mr. Trudeau's government has been forced to keep telling Canadians there is not much the administration can do. Any possibility of hefty government spending to create jobs and revive the economy appears out of the question, since the Canadian government itself is in deep fiscal trouble, with its deficit expected to hit more than $16 billion (US) this year, double what had been forecast.

While many of the problems bedeviling Canada are related to the worldwide recession, many observers feel Canada's woes have been worsened by Ottawa's policies.

Businessmen point in particular to Mr. Trudeau's energy program - a comprehensive, interventionist plan designed to reduce foreign control of the oil and gas business - as a major cause of declining foreign investment and economic malaise.

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