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Page last updated at 17:20 GMT, Wednesday, 28 January 2009

Canada unveils stimulus package

Michael Ignatieff in November as he campaigned for the LIberal leadership
Liberal leader Michael Ignatieff said the government was on probation

Canada's Conservative government has unveiled a multi-billion dollar stimulus package that includes infrastructure spending and tax cuts.

The budget sets out spending of C$40bn ($32bn, 23bn) over five years.

The minority government needs the support of at least one other party to approve the budget.

The main opposition Liberals say they will not bring down the government if parliament is given regular updates on how the money is being spent.

"We are putting this government on probation," Liberal leader Michael Ignatieff told a news conference on Wednesday.

"If the stimulus contained in this budget has any hope of helping Canadians, it actually has to reach them, but this is a government more inclined to make commitments than to keep them."

Votes on the budget are due to begin on Thursday.

Arguments over a budget presented last year escalated into a full-blown political crisis.

Last month, Prime Minister Stephen Harper's Conservatives risked being tipped out of office as opposition parties attacked them for doing too little to tackle Canada's economic problems and threatened to bring down the government in a confidence vote.

This scenario was only avoided when the Governor General Michaelle Jean suspended parliament at Mr Harper's request for six weeks until 26 January.

Speaking on Tuesday as he presented the budget, Finance Minister Jim Flaherty said the global economic crisis was "the challenge of our time".

"Canadians are feeling the effects of the global recession and they are concerned," he said.

Among the elements of the latest budget are:

  • Tax cuts for lower and middle-income earners worth C$20bn
  • C$12bn in infrastructure spending including roads, bridges and clean energy programmes over two years
  • C$1.9bn in tax measures for businesses
  • Targeted loans and worker training programmes

Canada, which has not run a budget deficit for more than a decade, will be on course for a C$85bn deficit over five years, according to government estimates.

The government predicts that the plan will boost the economy by 1.4% this year and create 190,000 jobs by 2011.

The credit crunch and falling commodity prices have started to hit Canada, which lost more than 100,000 jobs in the last two months of 2008.

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