Things aren’t looking so good for Newfoundland and Labrador at the moment - the island province is currently on the verge of bankruptcy as it deals with a hefty set of financial problems and an epic $15.5-billion debt. To some financial analysts, such issues are so sizeable that they seem almost insurmountable.
Professor Ian Lee of Ottawa’s Carleton University relayed his concerns to the federal Standing Committee on Human Resources, Skills and Social Development last month, saying that the province is currently on a delicate financial path that could push it into insolvency within the next decade.
"I can't see this ending [in] anything but an urgent request at some point by the government of the day of Newfoundland and Labrador to the federal government saying, 'Look, you've got to step in and help us,’” he told CBC in an interview.
Newfoundland and Labrador has been on a downward spiral for a while now. But according to Lee, the province’s rapidly aging and shrinking population, coupled with the failure of a massive $12.7-billion hydro project in Muskrat Falls, Labrador, will push it past the financial tipping point.
A possible course of action could be to get the federal government to make Newfoundland and Labrador’s debt a national issue; however this could set up a precedent for other struggling provinces.
To make matters worse, a tentative agreement between the N.L. government and the Newfoundland and Labrador Association of Public and Private Employees could mean the province’s “signing away of its ability to reduce the workforce.”
Howard Levitt, a Canadian employment lawyer, explains that the agreement, which involves a wage freeze, a no-layoff clause, and up-front severance payments for the whole public sector, will “turn lenders away” and inevitably result in the province being forced to declare bankruptcy.
Within ten years, Newfoundland and Labrador, as well as other struggling provinces like New Brunswick, may need bailing out.