Canada’s former prime minister Stephen Harper warned last month that numerous governments around the world appear to be heading towards a debt crisis. 

Harper made the observation during an online three-day conference hosted by the finance firm Cambridge House International Inc. between January 17 and 19.  

According to Harper, the difference between the current impending financial crisis and the crisis his government successfully managed in 2008 has to do with how governments handle stimulus. 

“The result was that the government mandated the recession and government’s intervention in this recession for the most part has been not to spark economic activity – so called stimulus – not to stimulate economic activity, but merely to provide liquidity in the absence of economic activity. That’s completely different than what we were trying to do in 2008-2009 [and] I should add, much more dangerous in the long term,” said Harper.  

During Harper’s first term as prime minister, his government managed to weather the storm through the financial crisis in 2008. At the time the Conservatives introduced the Economic Action plan which included up to $12 billion in infrastructure spending, $20 billion in income tax relief and other stimulus initiatives. 

“The consequences of this around the world — I’m not trying to talk about specific governments here — the consequences around the world are very clear. We will leave this recession, the world, with a debt overhang that dwarfs what we saw in 2008, 2009. And what we saw after 2008, 2009 was after a financial crisis, recession and somewhat of a recovery was then a series of sovereign debt crises in several countries, in Greece, Italy, Portugal and Ireland,” said Harper.  

“This time the debt overhangs by governments as well as businesses and households are much larger. It is absolutely the case that we will have all kinds of solvency crises around the world and we will have significant sovereign debt crises in the near years to come, very soon.” 

Harper is not the only economist and global leader warning about impending financial turbulence. 

In October, World Bank Chief Economist Carmen Reinhart said there was a looming global financial crisis because of the pandemic.

Recently, Canada’s federal debt surpassed $1 trillion due to the Liberal government’s large coronavirus spending measures. 

Meanwhile, a recent report by the Fraser Institute predicted that Canada’s combined federal and provincial debt will surpass $2 trillion in 2021.