Solution on fiscal imbalance not likely soon, premiers say

Canada's premiersmeeting in St. John's this week are not optimistic they will reach an agreement on how to resolve the country's fiscal imbalance.

Premiers and territorial leaders arrived inthe Newfoundland and Labradorcapitalon Wednesday for a three-day conference to discuss issues like equalization and the rising cost of the Canadian dollar.

N.L. Premier Danny Williams lowered expectations Thursday morning that the premiers will reach common ground on how to solve fiscal imbalance by the end of the week.

However, Williams said he is willing to meet regularly over the next few months to resolve the matter.

"I'm optimistic we'll make some progress," said Williams.

"Consensus is going to be very difficult, there's no doubt about it, but I also believe… there's a common ground here where I think we can find a solution.

"My opinion is… it's better for us to try and find the parameters for a solution as opposed to having one imposed on us by the federal government."

It is expected the Harper government will soon announce a package to resolve ongoing complaints that Ottawa continues to run huge budget surpluses, while provinces say they are struggling to maintain services.

Premiers on different sides

The premiers have been bitterly divided over the issue of fiscal imbalance in recent months.

Some premiers, including Williams, see enriching the $11-billion equalization program as a means of evening the fiscal imbalance.

Quebec Premier Jean Charest said some progress is being made at the first ministers' conference, but he does not expect the premiers to agree on whether to include natural resource revenues in calculations for equalization payments.

He said that even if an agreement is reached, he expects the federal government to deliver on a promise to address the problem.

"Stephen Harper came to Quebec and delivered a speech on the 19th of December where he said this: 'I will fix the fiscal imbalance.'

"He did not say, by the way, 'I will fix the fiscal imbalance if there's a consensus among the provinces.' He did not say that."

Quebec is the largest recipient of equalization payments.

System criticized for draining coffers

Premiers of wealthier provinces, including Ontario and Alberta, have complained that the equalization system unfairly drains their provincial coffers.

Ontario Premier Dalton McGuinty has said Ottawa's surplus should be spent on health and education instead of the equalization program.

Still others, like B.C. Premier Gordon Campbell, said the simplest way to return a federal surplus to Canadians is to give them a tax cut.

Williams said Thursday he believes the provinces will eventually resolve the fiscal imbalance through a combination of equalization reform and increased transfer paymentsin areas suchas post-secondary education and transportation.

"There has to be a combination of all of these that I think will touch all the provinces," said Williams. "Give everybody something, but possibly not give everybody everything they want."

Most premiers, however, expressed doubt that there could be a consensus reached this week on the fiscal imbalance.