OTTAWA – Canada's ballooning $50-billion deficit is "affordable," Prime Minister Stephen Harper said today as he fended off political demands to dump his finance minister.

Opposition MPs jumped on news of Ottawa's bigger than expected deficit as proof of the government's mismanagement of the economy and demanded that Finance Minister Jim Flaherty be replaced.

"Canadians just cannot trust this government with their money. Will the Prime Minister fire this minister of finance?" Liberal Leader Michael Ignatieff said during Question Period.

Harper said the recession has meant growing payments to the unemployed and stimulus spending to communities coupled with lower tax revenues, which have all combined to cost federal coffers.

"We are borrowing money at historically low interest rates to help unemployed people, to build infrastructure. That is what we should be doing and what we will continue to do," the Prime Minister said.

"They (the Conservatives) have been incompetent," Liberal MP John McCallum told reporters earlier today.

"They overspent when times are good so we have a far bigger deficit than we need had they been more fiscally prudent."

The ballooning deficit, which Flaherty now says could exceed $50 billion, could change the political dynamic in Ottawa, tempting opposition parties into toppling the minority government before the summer recess.

But that would depend on how news of the bigger than expected deficit is received by the Canadian public, something that will take days, even weeks to unfold.

McCallum declined to be drawn into election speculation but added: "In a minority government setting, one can never rule out an election."

He said after his party's morning caucus meeting that the Liberals are taking aim at the Conservatives on three key points — reforming employment insurance, speeding stimulus spending and their record as an "incompetent fiscal manager."

"Whether that will lead to an election, you can speculate, I will not," he said.

But he was clear that the rising tide of red ink will not deter the Liberals from pressing the government to improve employment insurance benefits, even though that would mean billions of dollars more federal spending, McCallum said.

"To the extent that the economy is weaker than people thought, there will be even more unemployed people falling through the cracks who will need this assistance," McCallum said.

Flaherty's forecast of a $50-billion revenue shortfall is $16 billion higher than he predicted in the budget only four months ago.

And McCallum pointed out that Flaherty's November economic update did not foresee any budget deficits.

"Sadly, I'm afraid this serves to further undermine confidence in our finance minister at a time when Canada desperately needs competence and strength at the helm in this area," McCallum remarked.

"It's incredible that the same person who told us in November that Canada would have nothing but surpluses forever now acknowledges he's the $50-billion man."

The Liberals are expected to demand Flaherty step down during the afternoon question period in the Commons. There has been no indication that Flaherty's job is in jeopardy as far as Prime Minister Stephen Harper is concerned.

Yesterday, McCallum called the deficit "a shocking number," noting it is the largest deficit in Canadian history.

NDP finance critic Thomas Mulcair also took dead aim yesterday at Flaherty's credibility. "He's wearing the dunce cap of all Canadian finance ministers," Mulcair said of Flaherty.

"He swore up and down (last fall) that we would never go back to deficits. Then he said there was not going to be a recession.

"If we want to get out of this mess, the government's got to start telling the truth and the whole truth."

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Harper is facing increasing heat as the country's economic problems worsen, with Liberal Leader Michael Ignatieff threatening to topple the Conservative minority and force an election if the Tories continue to refuse to bring in major improvements to employment insurance during the recession.

But Flaherty said "it's necessary in the short term to run a large deficit — relatively large — to make sure that Canada gets through this (recession) well."

Previously, the worst yearly budget deficit was $39 billion, recorded by the Mulroney Tories in 1992-93.

Flaherty's revelation was the latest in a string of economic blows. Fresh proof of how badly the economy is crashing came hours before, when it was reported that 10.6 per cent more people were receiving employment insurance payments in March than the previous month.

In the Commons, McCallum said the government's deteriorating fiscal position reminds him of the unexpected budget deficit run up by the former Ontario Progressive Conservative government of which Flaherty was a part.

"In 2003, the finance minister was a senior member of the Mike Harris government and they ran on a balanced budget. Whoops, it turned out to be a big deficit," McCallum said, adding that last fall Flaherty predicted budget surpluses, but that's given way to a huge deficit.

"Why is the minister so bad with numbers?" McCallum asked.

Fielding the question, Harper said, "Virtually every national government in the world is running a deficit. Ours, by comparison, remains much lower than our competitors."

NDP Leader Jack Layton took aim at the Conservatives for creating "the largest deficit we have seen in the history of Canada."

"What do they have to show for it? There have been 400,000 people thrown out of work. There should at least be some results for the steps that they have taken, but there are not any," Layton said.

Flaherty said later the rising deficit was partly attributable to increasing EI payments, which he said would be several billion higher than the $19 billion budgeted for in January. Ottawa is also committed to supporting the struggling auto industry, he noted.

He declined to say if next year's prediction of a $30 billion deficit would also need to be revised.

But he insisted that the Conservatives would as planned bring the government out of deficit in four years without raising taxes.

Also, there are "some encouraging signs" in the economy, he said, adding that some analysts expect economic conditions to improve later this year and into next year.

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