While there was no explicit declaration that the G8 nations will, or should, spend more, there wasn’t anything close to a definitive statement that the countries will hold back additional stimulus.

Here’s what the declaration said, with the important parts bolded:

We note some signs of stabilisation in our economies and we believe that the turnaround will be reinforced as our measures reach their full effect on economic activity and contribute to improving confidence and expectations. However the economic situation remains uncertain and significant risks remain to economic and financial stability. We will take, individually and collectively, the necessary steps to return the global economy to a strong, stable and sustainable growth path, including continuing to provide macroeconomic stimulus consistent with price stability and medium-term fiscal sustainability, and addressing liquidity and capital needs of banks and taking all necessary actions to ensure the soundness of systemically important institutions.

The G8 nations are saying two things. The first is that they’re committed to seeing the first round of stimulus spending through to the end. And the second is that they’ll spend more money if they need to. Of course, it’s the U.S., Britain and Japan who will be the ones to spend more money, while Canada, Russia and Germany have said that their original rescue package will be the only bailout their countries will get.

Whether or not you think that more spending is the right way to go, we can all agree that the G8 countries need to start developing an exit strategy. Fortunately, the nations at the summit want to figure a way out of this mess too.

Point 13 of their deceleration states:

We agreed on the need to prepare appropriate strategies for unwinding the extraordinary policy measures taken to respond to the crisis once the recovery is assured. These “exit strategies” will vary from country to country depending on domestic economic conditions and public finances, and must ensure a sustainable recovery over the long term. We welcome the analytical work of the IMF which will assist us with this process.

Clearly, there’s still a long road ahead before the G8 nations can curb spending and pay down their deficits, but at least talking about turning on that light at the end of the tunnel.

Harper said this morning that he will urge his fellow diplomats to see their first round of stimulus spending through before they offer more rescue aid.

“Before there’s talk of additional stimulus, I would urge all leaders to focus first on making sure the stimulus that’s been announced actually gets delivered,” Harper told a reporters today. “That’s been our focus in Canada and I would encourage the same priority elsewhere.”

The PM is right — it’s best to let the billions in funds start working before countries cough up more cash — but what Harper’s not saying is that it’s still going to be a long time before Canada’s own stimulus package really gets going.

A couple weeks ago I spoke to Don Drummond, TD Financial’s vice-president and chief economist (check out the video), and he said Canada’s stimulus initiatives won’t kick in until after the economy has recovered, sometime in late 2010 or 2011.

In other words those billions of bailout funds the Conservatives have promised, and the other parties pushed for, are essentially useless in the short-term.

“We’ve had a collective memory failure,” says Drummond. “Fiscal policy always takes a long time before it hits the economy and that was why for a quite a long period of time it wasn’t believed to be an effective tool in the midst of a recession. I think we just overlooked that and what we really would have liked is for stimulus to come in 2009 and we don’t think much of it will.

“As the government said in its report card, a lot of money has been allocated, but that doesn’t mean its flowing,” he adds. “In many cases the infrastructure that was delivered in the budget has to be tri-partied funded — you have to get federal provincial and municipal governments together and that will take a long time.”

So, while Harper should caution his cohorts to hold off on more stimulus funding, he might also want to figure out how to get his own dollars working faster.

Further reading: my recent cover story on the state of early-stage financing.

Also, a first skeptical take from Wellington Financial’s Mark McQueen, who has been prolific on the sector’s woes.

UPDATE

As noted in the trackbacks, McQueen issued another biting missive today (why he mocks MRI for contacting reporters, I don’t know).

Also, check out Toronto-based high-tech lawyer Suzie Dingwall Williams’ take on things.

The overall message was both stark and simple: the world is in the throes of an economic crisis that is unprecedented in its scope and potential severity, and governments have a vital role to play in helping those most hurt by the recession and in ensuring that the recovery is as quick and as robust as possible. If ever there was a time for smart, substantial and timely economic stimulus from government, that time is now.

Too bad Ottawa didn’t get the memo.

For anyone looking for significant new stimulus, the fiscal update that Finance Minister Jim Flaherty delivered yesterday was a major disappointment. Yeah, yeah, pledges to cut back on wasteful spending are always welcome. But where’s the payoff in terms of getting the economy going again?

And what is this government thinking? On the one hand, it has claimed that now is not the time for major new initiatives–those will have to wait for the ‘09 budget. On the other, it managed to work into the fiscal update a clause to rescind subsidies for federal political parties, which amounted to all of $27 million in 2006. So the government can manage the politically irritating and the trivial; it has yet to show it can manage, or even address, the biggest economic challenge of the 21st century.

Several weeks ago, my magazine called for an all-party, non-partisan, intergovernmental  approach to a crisis that will affect all Canadians, from the corporate boardroom to the shop floor. We have yet to see such leadership.

One hopes it is not too late, that there is method to this seeming madness, though with the threat of a nonconfidence vote now seeming very real, one wonders what that method could be. Maybe it makes some sense for Canada to wait on an economic package until some of the details of the US stimulus plan are settled, particularly with respect to the auto industry. But that’s no excuse for the government to make a move in what appears to be the wrong direction.

Canadians need action on the economy, and instead they might end up with an election, or a coalition government, that nobody really wants.