A Quebec Divorce Wouldn't Be Cheap

By , Staff writer of The Christian Science Monitor

WHAT if Canadian Prime Minister Jean Chretien, a slew of polls, and the conventional wisdom are all wrong and Quebeckers vote in favor of independence this year? How much will it cost?

Until recently, the price of independence was scarcely raised.

But two prominent Canadian-policy think tanks along with the co-authors of a new book called ''Dividing the House,'' have tallied the costs to Quebec and the ''Rest of Canada.''

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''The federal authorities pretend that this could no more happen than a man could have a baby,'' writes Gordon Gibson, a policy maven at the Vancouver-based Fraser Institute. ''But clearly the possibility is well above zero, and may soon close on 50-50.''

Not quite 50-50. So far, recent polls indicate that a breakup of Canada is unlikely. About 60 percent of Quebeckers still prefer staying inside Canada, over the uncertainties and steep costs of separation and nationhood.

The biggest of the projected costs to Quebec, if it breaks with Canada, is shouldering its share of Canada's $551 billion (Canadian; US$392 billion) federal debt. Quebec already holds $70 billion (US$50 billion) in debt and opinions vary on how much more it can carry.

Based on the assumption that Quebec's share would be the same as its portion of the population -- 25 percent -- the public debt of an independent Quebec would be ''substantially higher'' than if it remains in Canada, according to a Fraser Institute report on the costs of Quebec independence released in January. Its findings include:

*Quebec's ''separation obligation'' or share of the federal debt after federal assets are deducted from liabilities would be $150 billion.

*Quebeckers in an independent Quebec would receive less than half of the government services previously enjoyed while paying the same amount of taxes to their new Quebec government.

*Debt charges for an independent Quebec would be more than 50 percent higher than they would be for a Quebec within confederation.

*Independence would leave Quebec with a debt load heavier than any other Organization for Economic Cooperation and Development country including Belgium, Ireland, and Italy. It would also be worse than Canada's federal debt load and that of all Canadian provinces except Newfoundland.

Quebec separatists have offered little so far in the way of an equally detailed rebuttal to such concerns. Quebec Premier Jacques Parizeau, a London School of Economics-trained economist, has reportedly ordered several new analyses to assuage public fears.

Yet so far most separatist financial statistics come from the 1991 provincial Belanger-Campeau Commission on the consequences of Quebec independence. It pegged Quebec's share of the federal debt at 18.5 percent.

With public curiosity rising over the cost issue, so is separatist sensitivity to it. Last month, a French-language reporter persisted in asking Jean Campeau, Quebec's finance minister, how he would deal with the debt of an independent Quebec? Mr. Campeau finally responded by questioning the reporter's patriotism. ''Are you a Quebecker?'' he asked.

Campeau made more waves last month when he said Quebec would not accept its share of the federal debt if doing so would stifle its economic growth as a young nation. ''It's not our debt, it's Canada's debt,'' Campeau said. The Canadian dollar plummeted until Deputy Premier Bernard Landry said the next day that ''Quebec will pay its debts. You don't start out founding a new country by robbing your neighbor. That's obvious.''

Patrick Grady, president of Ottawa-based Global Economics and co-author of ''Dividing the House,'' notes that Campeau is correct -- Canada is legally liable for making sure debts are paid, no matter what Quebec does.

Still, he says, Canada would have such leverage that Quebec would be forced to assume a proper share of the debt, which he estimates would be $136.4 billion.

In order to get Quebec to assume its debt rather than ''pay the interest'' that accumulates, as Mr. Parizeau has said, Canada will have to use its economic weight in negotiating new trade arrangements and in permitting Quebec's continued use of the Canadian dollar.

''The big risk is that there could be an acrimonious split -- and that would cause financial market chaos up here that could cause a severe recession,'' Mr. Grady says. ''There's no question that Quebec will be severely burdened by debt no matter what proportion it assumes.''

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