Justin Trudeau names Chrystia Freeland Canada's new finance minister

Justin Trudeau named Chrystia Freeland as Canada’s finance minister, according to a source familiar with the matter, replacing Bill Morneau, who resigned Monday evening.
 

Freeland, considered a pragmatic minister who handled the renegotiation of the North American free trade agreement with Mexico and the U.S., would be the first woman to hold the role.
 

“The choice of Deputy Prime Minister Chrystia Freeland will reassure financial markets, given her prominent stature and seniority,” Doug Porter, chief economist at Bank of Montreal, said in an email. “Given that this is clearly not a ‘placeholder’ candidate, and as someone who can be expected to stand her ground on key issues, her choice will provide some confidence.” Freeland’s appointment was reported first by CTV News.
 

The Canadian dollar rose against its U.S. counterpart, climbing 0.5% to C$1.3156 at 8:43 a.m. Toronto time, though it was lower versus most other major currencies. Government bond yields were little changed.
 

Morneau announced his resignation at a press conference in Ottawa after a rift with Trudeau proved impossible to repair. He said he told the prime minister earlier Monday that he doesn’t intend to run in the next election.
 

The shuffle comes at a critical moment for Trudeau as his government crafts a plan for economic recovery amid historically high unemployment. Morneau was seen as one of the more fiscally cautious members of the cabinet, and the prime minister’s office and the finance department have disagreed over how to direct C$240 billion ($182 billion) in Covid-19 emergency spending. Canada is poised to run a record deficit of about 16% of gross domestic product this year.
 

“The longer term issue is whether the pandemic-related surge in spending to support the economy through the shutdowns morphs into something more permanent with the accompanying deficit, debt and tax implications,”Porter said in a report to investors Monday night.
 

The Trudeau-Morneau rift burst into full view after Bloomberg reported on Aug. 10 that former Bank of England governor Mark Carney is advising the prime minister on an economic recovery plan. Trudeau released an extraordinary statement the following afternoon stating his “full confidence” in Morneau, as speculation grew over whether the minister would be replaced in an expected cabinet shuffle.
 

“Like any job, there’s a time where you’re the appropriate person in the role, and there’s a time when you have to decide when you’re not the appropriate person in the role,” Morneau said Monday night. He said he would put his name forward to be secretary general of the Organisation for Economic Co-operation and Development.
 

The two men met on Monday at Rideau Cottage, Trudeau’s residence, for about 30 minutes, according to a person familiar with events.
 

Multiple officials told Bloomberg that divisions between the prime minister’s office and Morneau’s finance department grew over how to design the government’s response to Covid-19. Points of debate have included how much unemployed workers should receive under the government’s flagship Covid-19 income support program and whether to increase a wage subsidy for businesses affected by the pandemic.
 

Morneau was also caught by surprise by Carney’s recent involvement, according to one person familiar with the situation.

“A finance minister needs to have a compelling vision for the economic future of the country and be empowered to achieve it,” said Jean-Francois Perrault, chief economist at Bank of Nova Scotia.
 

The controversy over a C$43.5 million government student grant contract had also strained the relationship. Trudeau and Morneau are both under investigation by the government’s ethics watchdog over potential conflict of interest in the awarding of the contract to the WE Charity, which has used Trudeau’s mother, brother and wife as paid speakers at events and employed Morneau’s daughter. Both men appeared before parliamentary committees over the matter.
 

“Every step of the way, Bill and I have worked closely together, along with our team of cabinet ministers and caucus members to help Canadians navigate this challenging time,” Trudeau said in a statement. “Our number one priority has been supporting Canadian families and businesses the best and fastest way possible.”