Canada’s provincial debt is a growing crisis for everyone

Deficit and debt problems aren't just an issue for the Europeans or the Americans.

According to a recent column in the National Post, we have our own sovereign debt problem brewing right here in Canada.

"Total provincial net debt (debt minus financial assets) is expected to reach more than $515-billion this year (2012-13), up more than $200-billion since 2007-08. As a percentage of the economy (GDP), the burden of provincial debt has increased to 29 per cent this year from 21 per cent in 2007-08," the article notes.

"Add on the current federal net debt of $663-billion and Canadians are leaving a legacy of over a trillion dollars in direct debt to the younger generation - more than 65 per cent of GDP, up from 54.5 per cent in 2007-08.

In other words, each Canadian, on average, owes a whopping $32,000.

And the problem is only getting worse.

All of Canada's provinces, with the exception of Saskatchewan, are running deficits in 2012/13 - in some cases huge deficits.

"We should be very worried," Derek Burleton, Vice President & Deputy Chief Economist, of TD Bank told the Globe and Mail in January.

"I think most provinces are running structural deficits which means even if the economies were growing strongly we would still see red ink."

In his column for the Toronto Sun, John Robson argues that Canadian governments haven't learned the painful lessons of the 1990s and are not learning from the crises in Europe.

Robson also wonders what would happen if, at some point, a province can't meet it's debt obligations.

"Imagine that one province finds itself up against the wall for the first time since Alberta in the mid-1930s," he writes. "Do the feds let it fail, with potentially catastrophic consequences for the credit rating and interest payments of every government? Or bail it out and hand every provincial treasurer a blank cheque, with the catastrophic consequences that might have for debt ratings?"

"It could happen, and suddenly."

Debt Burden / person (Source: Canadian Federation of Independent Business)

Quebec $39,773

Ontario: $36,004

Newfoundland & Labrador: $33,535

Nova Scotia: $32,824

New Brunswick: $31,786

Prince Edward Island: $31,576

Manitoba: $30,156

British Columbia: $25,667

Northwest Territories: $23,042

Saskatchewan: $21,783

Nunavut: $21,296

Alberta: $14,544

Yukon: $12,707