Harper tells Davos that hard choices needed now

Prime Minister Stephen Harper delivered a bold message in Europe on Thursday, telling developed countries they have to start making hard choices and stop taking their wealth for granted.

Wealth isn’t guaranteed for the world's richest countries, Harper told world and economic leaders gathered for the World Economic Forum in Davos, Switzerland.

"Is it the case that in the developed world too many of us have in fact become complacent about our prosperity? Taking our wealth as a given, assuming it is somehow the natural order of things, leaving us instead to focus primarily on our services and entitlements?" the prime minister said.

Western nations have to decide to pursue economic growth, or risk declining fortunes, he said.

"Easy choices now mean fewer choices later," Harper told the 2,600 delegates. 

Harper said the wealth of Western economies isn’t inevitable, just as the poverty of emerging ones isn’t. He emphasized the ways he says Canada is letting the economy grow, such as expanding free trade talks and cutting red tape.

The government has repeatedly called for additional action to get the continent's debt problems under control, including at the G20 summit in France last November.

Harper says while there's plenty of government money for research and innovation in Canada, the private sector still needs to do more.

There are Canadian companies that are cutting-edge innovators, he said, but broadly speaking, the Canadian business side of the economy is not as innovative as it needs to be.

"We’re not under any illusion … The nature of our economy is we have to be innovative. We have to be at the high end of the value change and innovation is going to be critical," he said.

Canada's pension system to see 'necessary' changes

Harper said Canada will significantly reform the immigration system, using new Canadians to fill gaps in the labour force.

"We will ensure that, while we respect our humanitarian obligations and family reunification objectives, we make our economic and labour force needs the central goal of our immigration efforts in the future," he said.

Harper also addressed Canada's retirement system, saying the government will make the changes necessary to ensure it's available now and for the next generation.

"We have already taken steps to limit the growth of our health-care spending over that period," the prime minister said. "We must do the same for our retirement income system."

He said the system's centrepiece, the Canada Pension Plan, is "fully funded, actuarially sound and does not need to be changed.

"For those elements of the system that are not funded, we will make the changes necessary to ensure sustainability for the next generation while not affecting current recipients."

He also said Canada's "demographics also constitute a threat to the social programs and services that Canadians cherish."

The number of Canadians over 65 is expected to rise to 9.3 million in 2030 from 4.7 million in 2010. Officials say, in turn, that the cost of old age security is pegged to rise to $108 billion a year in 2030 from $36 billion in 2010.

In Ottawa, NDP finance critic Peter Julian said the Conservative government is spending money in the wrong places, such as building new prisons and buying fighter jets.

The NDP agrees there need to be reforms to the pension system, Julian said, but pointed to reports the government may increase the age of eligibility for Old Age Security to 67 from 65.

"He’s going to oblige Canadians to work two more years before they have access to pensions. That’s completely unacceptable," he said.

U.S.-Europe trade deal?

However, some of Canada's economic indicators may not be as strong as it would seem, according to a new study by Canadian Auto Workers economist Jim Stanford.

The study examined jobs and growth on a per-person basis in recent years. Since Canada's population is growing faster than other countries', per capita growth and job creation are mediocre compared to international standards.

Meanwhile, German Chancellor Angela Merkel suggested Thursday that the European Union and the United States should pursue a free trade deal, and rejected calls for a big increase in the eurozone's rescue fund.

Merkel expressed determination to defeat the weaknesses of the joint euro currency used by 17 nations. But she batted away appeals from the IMF and others for a big jump in the size of the fund created to help weaker eurozone nations struggling with too much government debt.

"We guarantee the euro, but what we don't want is to promise something we can't hold," she said.

British Prime Minister David Cameron also signalled support for an EU-U.S. trade deal, and said signing trade agreements with Canada and other countries would boost Europe's economy.

"Rather than trying to involve everyone at once, let us get some bilateral trade deals done," he said, directing his comments to European Union members.

"Let's get the EU trade agreements — with India, with Canada, with Singapore — finalized by the end of the year."

Also at Davos, Microsoft chairman Bill Gates announced a new pledge of $750 million US to the global AIDS fund at the forum Thursday, Reuters reported, and he asked governments to continue contributing to help fight the disease.

"These are tough economic times, but that is no excuse for cutting aid to the world's poorest," Gates said at the meeting.

The founder of the annual World Economic Forum, Klaus Schwab, appealed to global movers and shakers Wednesday for a "great transformation" that would challenge the basic tenets of capitalism.

Other leaders of global organizations, including Bank of Canada governor Mark Carney, have issued a joint "call to action" asking country leaders to fuel growth and jobs in a way that confronts chronically high youth unemployment, is environmentally sustainable, and also deals with inequality.