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Bank of Canada governor Mark Carney says Europe must find the political will to support its debt-saddled countries for a period of time as those nations adjust.  (Sean Kilpatrick/Canadian Press)


Bank of Canada governor Mark Carney says Europe must come up with a trillion euros immediately to stave off its sovereign debt crisis and stabilize financially crippled countries such as Greece.

"However you want to design this ... you need a big pot of money to get from today to that point, which is going to be two, three years in the future, and you need it now," Carney told CBC Radio's The House in an interview with host Evan Solomon airing Saturday.

"What is important here, what is not being asked, what the Europeans are not discussing is a transfer of a trillion euros from one set of countries to another set of countries. It's support for a transition, for a period of time as those countries adjust."

Canada will be flexible to Europe shock: Flaherty

Finance Minister Jim Flaherty says he is confident European officials will tackle the debt crisis, but adds it will take another few weeks to get all 17 countries to ratify a plan to bolster Europe's financial stability fund.

"I'm satisfied certainly that they understand that it's imperative to take action," Flaherty told CBC News Network on Saturday during a break in G20 meetings in Washington.

Flaherty stressed Canada is watching the Europe situation carefully and would react to any "shock" from the continent in a "flexible and pragmatic way" to protect Canada's economic growth.

"We've done it before and we'll do it again," the finance minister said.

Carney said European officials have to ensure financial institutions have enough capital and that the European Financial Stability Facility — the fund created in May 2010 to inject cash into banks in the region in the event of a financial crisis — is large enough.

"And the complication there is, we're talking 17 different governments, we're also talking about the European Commission and the European Central Bank, so there are a variety of players that have to take the decisions along the same lines, at the same time," he said.

Greece, Carney said, is just a symptom of the Eurozone's problems.

If Greece still had its own currency, it would have the option to devalue it, which would drive inflation up for Greeks but also shrink the national debt.

"The way [the eurozone] was originally designed 10 years ago has a flaw, to put it mildly," Carney told Solomon.

Carney made the remarks as he and Finance Minister Jim Flaherty are attending meetings of the G20 finance ministers and International Monetary Fund in Washington.

"The issue is, can European authorities put in place an alternative for these countries so that for a period of time ... while they take the necessary fiscal actions and other reforms, they can access financing at reasonable terms?" the bank governor said.

"And if you want to be safe, if you want to overwhelm markets, which is really what you want to do once you get into these types of situations, you want to put more money on the table than you really need. Then you start in the neighbourhood of a trillion Euros."

Flaherty has said he expects European leaders to stick to the commitments they made at this week's G20 meeting, adding he believes the EFSF was insufficient to deal with the size of Europe's "very serious" financial crisis.

On Friday, the head of the International Monetary Fund, Christine Lagarde, said the world faces a similar problem as it confronted in 2008, at the start of the worst economic crisis in decades.