UPDATE 2-Future of Canadian finance minister appears uncertain after report of clashes with Trudeau

(Recasts lead, adds details, background)

By David Ljunggren

OTTAWA, Aug 11 (Reuters) – The future of Canadian Finance Minister Bill Morneau appeared uncertain on Tuesday after a newspaper said he had clashed with Prime Minister Justin Trudeau over how much Ottawa was spending to tackle the coronavirus outbreak.

The Globe and Mail cited unnamed sources as saying Trudeau was uncertain whether Morneau was the right person to handle the recovery. Morneau, 57, has been finance minister since the ruling Liberals took power in late 2015.

The report was the first public sign of tension inside Trudeau’s government over how to handle the pandemic. Canada has provided more than C$212 billion ($159.7 billion) in direct COVID-19 support and nearly 14% of gross domestic product in total support.

Ottawa has spent C$64 billion on an emergency benefit which it plans to fold into an existing employment insurance program. The Globe said Trudeau’s team wanted a two-year freeze on premiums while Morneau wanted to cut that period to one year to save money.

No one in Trudeau’s office was immediately available to comment on whether he still had faith in Morneau. Morneau’s chief spokesman did not immediately respond to a request for comment.

Canada’s budget deficit this fiscal year is expected to hit C$343.2 billion, the largest shortfall since World War Two.

Potential candidates to replace Morneau include Deputy Prime Minister Chrystia Freeland, Foreign Minister Francois-Philippe Champagne and Mark Carney, a former head of both the Bank of Canada and Bank of England, the paper said.

Carney is not a Liberal legislator and would have to win a Parliamentary seat before he could be appointed to cabinet.

Morneau is also under pressure over his failure to promptly repay travel expenses covered for him by a charity at the heart of an ethics investigation. Although Morneau apologized, opposition legislators say he must resign.

The charity picked by the government to manage a major student grant program had ties to Trudeau’s family. He apologized but denied the charity has received any preferential treatment over the deal, which has been scrapped.

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