KITCHENER, Ont. — Increased spending to finance Canada’s role in the war against terrorism coupled with a slowing economy will shrink the budget surplus promises federal Finance Minister Paul Martin.

The surplus, which stood at about $10 billion in mid-summer, is in jeopardy of vanishing altogether.

“There’s no doubt we are going to have a very tough third and fourth quarter when you see what’s happening to the economy in the United States, and obviously the influence that is going to have on us,”
Martin tells a room of Grit supporters in Kitchener, Ont. “Obviously the decline in the economy will affect that surplus.”

The terrorist attacks on the World Trade Center and the Pentagon have dampened consumer spending in the U.S., and “we are going to have to judge this week by week,” he says.

About 400 Liberal party supporters packed the upstairs of the Kitchener Farmers’ Market last week to greet the finance minister, widely touted as a leading contender to replace Jean Chretien when the prime minister steps down.

“The extent of the international effort against terrorism has not been decided. As you know, the Americans are still evaluating their position,” he says. “As soon as we know, we will be in a position to respond.”