OTTAWA - It is a remarkably difficult time to make any kind of economic forecasts. The ebb and flow of global markets are next to impossible to predict - yet every major industrialized country is deeply impacted by these massive swings.

Recent market collapses and failures in Greece and Ireland are likely only the tip of the iceberg. While Canada has weathered the recession with our financial institutions in relatively good shape, this is only part of the story. Canada needs strong economic partners around the world – including Europe. While the prospect of even more bailouts for some of Europe’s larger economies are discussed (read: Spain), even the EU’s traditionally stable French-German bulwark is feeling the strain.

Canada’s leading economists have been caught up in a good news/bad news situation for some time now – made even more difficult with our Canadian dollar set to remain at or near par with the American greenback for the foreseeable future.  These issues certainly influenced Bank of Canada Governor Mark Carney’s decision to maintain Canada’s key interest rate at 1%.

The outlook for Canadian exports is understandably bleak, yet Mark Carney also improved upon his economic forecasts for the next two years. In other words – this is an uncertain time, where Canada’s growth and increased challenges are competing for prominence.

International political economy is a difficult matter to discuss in simple terms – but it has often been characterized by the analogy of riding a bicycle. Momentum is crucial, and when momentum starts to disappear or slow down, it is much easier to crash. There are many wheels on this bicycle in Europe that have been wobbling for more than a year, and their momentum has been waning.

With Canada’s corporate productivity still flagging and slowing our own, native recovery efforts this is a major source of concern. Global market uncertainty is counterproductive when it is direct foreign investment that Canada needs. It is vital to identify and correct any lingering speculative ‘bubbles’ that threaten our fledgling recovery. Chief among these concerns is our much-debated housing bubble – which, judging by Finance Minister Flaherty’s tightened mortgage lending rules this week, is clearly something that the federal government is also concerned by.

Maintaining a low, key interest rate will certainly help alleviate this problem - yet this can be a dangerous economic tool to abuse. Fiscal and monetary policy must not be manipulated too readily - as this can dig a deeper hole to climb out of. The Bank of Canada's actions, however, seem to be above reproach in this case - maintaining low interest rates is a united, international strategy to encourage economic recovery. When contrasted to the current American situation, our plight becomes slightly more enviable.

We are not manipulating monetary supply and using controversial bond purchases to sustain ourselves in this crisis. Yes, our federal government has borrowed heavily during the past two years and we have established a correspondingly large deficit - but we have not leveraged the prosperity of future generations to sustain a fundamentally unsustainable system. This is the cold reality south of the border right now, and their road to prosperity and sustainability has become much more difficult.