Bill Morneau speaks at a news conference in Ottawa, Ontario, Canada, on August 17.
Photographer: David Kawai / Bloomberg
Photographer: David Kawai / Bloomberg
Canadian Finance Minister Bill Morneau’s dismissal following a rift with Justin Trudeau proved impossible to repair, leaving the cabinet with a big hole in the midst of a deep recession.
Morneau made the announcement at a press conference in Ottawa on Monday night, saying he told the prime minister earlier in the day that he does not intend to run in the next election. Trudeau did not immediately name a replacement, but the job will not be completed by former Bank of England Governor Mark Carney, according to two people familiar with the matter.
The departure comes at a critical moment for Trudeau, as his government makes a plan for economic recovery amid historically high unemployment. Morneau was seen as one of the more fiscally prudent members of the cabinet, and the Prime Minister’s Office and the Department of Finance disagree on how to spend C $ 240 billion ($ 182 billion) in Covid- 19 emergency expenditures need to be addressed. Canada is poised to run a record deficit of about 16% of gross domestic product this year.
The Canadian dollar did not change much, initially falling less than 0.1% to C $ 1.3232 per US dollar before jumping back. It traded at C $ 1.3196 from 10:31 a.m. Ottawa time.
“Any serious reaction in the market is likely to await the announcement of a replacement, and therefore any related potential shifts in policy direction,” he said.
Doug Porter, chief economist at Bank of Montreal, said in a report to investors. “The issue in the long run is when the pandemic-related rise in spending to support the economy through the shutdowns morphs into something more permanent with the attendant deficit, debt and tax implications.”
The name of Deputy Secretary of State Chrystia Freeland has been circulated as a potential replacement for Morneau. She would be the first woman to keep the job. Foreign Minister Francois-Philippe Champagne, one of Trudeau’s most trusted ministers, is considered a possibility, as is Jean-Yves Duclos, a Quebec economist who is president of the Treasury board, a cabinet post.
“It’s the right time for a new Minister of Finance to deliver that plan for the long and challenging road ahead,” Morneau said.
“Like any job, there is a time when you are the right person in the role, and there is a time when you have to decide if you are not the right person in the role.”
Morneau said he would advance his name as secretary general of the Organization for Economic Co-operation and Development.
The Trudeau-Morneau split erupted in full view after Bloomberg reported on August 10 that Carney, the only person to own the central banks of two major nations, was advising the prime minister on an economic recovery plan. Trudeau released an extraordinary statement the following afternoon, declaring his “complete confidence” in Morneau, as speculation grew as to whether the minister would be replaced in an expected cabinet shuffle.
The two men met about 30 minutes Monday in Rideau Cottage, Trudeau’s residence, according to a person familiar with the incident.
Several officials told Bloomberg that divisions between the prime minister’s office and Morneau’s finance department grew over how they drafted the government’s response to Covid-19. Points of discussion have included how many unemployed workers should receive under the government’s flagship Covid-19 income support program and as a wage subsidy increase for companies affected by the pandemic.
Morneau was also surprised by Carney’s recent involvement, according to one person familiar with the situation.
“A finance minister must have a compelling vision for the country’s economic future and be empowered to achieve it,” said Jean-Francois Perrault, chief economist at Bank of Nova Scotia.
Justin Trudeau shakes hands with Bill Morneau during a swearing in ceremony for the new Liberal cabinet in 2019.
Photographer: David Kawai / Bloomberg
The controversy over a C $ 43.5 million student grant contract had also affected the relationship. Trudeau and Morneau are both being investigated by the government’s ethics guard over potential conflicts of interest in awarding the contract to the WE Charity, which Trudeau’s mother, brother and wife used as paid speakers at events and Morneau’s daughter engagement. Both men appeared before parliamentary committees on the matter.
“Every step of the way, Bill and I have worked closely together with our team of cabinet ministers and cucus members to help Canadians navigate this challenging time,” Trudeau said in a statement. “Our priority as number one has been to support Canadian families and businesses in the best and fastest way possible.”
– With the help of Shelly Hagan
(Updates with information on Canadian dollars and information on the meeting between Morneau and Trudeau on Monday.)
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