Merkel: Canada should serve as model to Europe

(AP) OTTAWA - German Chancellor Angela Merkel is reiterating her call for fiscal discipline in Europe by praising Canada for not "living on borrowed money" and saying Canada should serve as a model.

Merkel arrived on Parliament Hill in Ottawa on Thursday for meetings with Canadian Prime Minister Stephen Harper. She had dinner with Harper Wednesday.

In a statement posted on the German government's website Merkel lauded Canada.

"Canada's path of great budgetary discipline and a very heavy emphasis on growth and overcoming the crisis, not living on borrowed money, can be an example for the way in which problems on the other side of the Atlantic can be addressed," Merkel said. "This is also the right solution for Europe."

Merkel and Harper will hold a press conference later. Merkel is fresh off her vacation and markets will be looking for any comments about whether Germany is ready support European Central Bank President Mario Draghi's attempts to do "whatever it takes" to save the eurozone.

Merkel and Harper share the view that austerity, and not more government stimulus, is necessary. Harper, also a conservative, has said that fiscal discipline and economic growth can go hand in hand.

Canadian finance minister Jim Flaherty noted Wednesday that Canada has reduced its deficit in half since 2009 and is on track for a balanced budget at a time of relatively modest growth. He said countries can strike a balance where you have modest growth yet maintain a fiscal track of balanced budgets.

Canada's oil and commodity-rich economy has fared better than other nations in the G-7 in recent years. There was no mortgage meltdown or subprime lending crisis in Canada, and its banks are rated among the soundest in the world. Canada did a stimulus in 2009 but is now attempting to balance the budget.

Merkel and Harper are also discussing Canada's bid for a free-trade pact with the European Union. Harper wants an agreement by the end the year. He said this week there are some rounds of negotiations still to go.

Flaherty said despite Europe's struggles, Canada remains very interested because the EU is still the largest market in the world in terms of the size of its middle class.