Yesterday, the First of July, was Canada Day.
Discussing the crisis in the Eurozone with some visiting Canadian relatives led to the question How stable is the Canadian currency union?
At first sight it seems to be much more stable than its European counterpart. The Canadian banking system is renowned for its solidness. It is dominated by five national banks that operate coast to coast, supervised by the much-admired Bank of Canada. There is a large national budget that includes important elements of inter-provincial fiscal equalization. Internal labour mobility is relatively high.
But on the other hand the provincial governments are not constrained in their borrowing, there are enormous differences between the economic structures of the provinces, and there is always the Quebec question.
In fact, to a surprising extent, the stability of the Canadian union appears to depend on the fact that, as the author of this article puts it,”there are no Greeces here”. He draws attention to flaws in the design of the Canadian currency union that could come home to roost some day.