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“In my judgment a gradual reduction in the deficit is the way to go if that can be managed,” he said. “I think it can be managed.”

Last month, Finance Minister Jim Flaherty said he may need to revise his deficit targets given the risks posed by the faltering global recovery.

The Conservative Party government’s 2013 budget will keep “taxes low and deficits coming down,” Harper said.

While he said he always expected the recovery to be slow, Harper said he hadn’t anticipated the global economy would suffer from such a prolonged period of uncertainty, which right now is primarily emanating from Europe.

He said there are risks fiscal strains could also undermine the U.S. economy, and cited a broad consensus that policy makers in the world’s biggest economy “must take a series of difficult measures across a range of policy actions.”

Diversify Relations

There is “not a lot of certainty south of the border either,” Harper said. That’s why Canada needs to diversify its economic relations to countries such as China, he said.

Harper said he raised concerns about imbalances between the two countries in a meeting with Chinese President Hu Jintao last week in Russia, adding there is some evidence Canadian exports and investment into the Asian country is rising.

“We see great opportunity in this relationship and great opportunity given the expected growth of China but first and foremost we have to make sure we are protecting the interests of the country and that the Canadian side is getting our share of that opportunity,” Harper said.

Harper wasn’t asked in the interview about Cnooc Ltd.’s $15.1 billion proposed takeover of Calgary-based oil and gas producer Nexen Inc.

Bloomberg.com