Finance Minister Jim Flaherty says he expects a temporary fix on the U.S. fiscal cliff crisis by the end of the year, and hopes Canada will avoid becoming collateral damage in the political battle that could ensue through early 2013.

In an interview to be broadcast on CTV's Question Period Sunday, the finance minister said that the potential for a budget crisis south of the border means Canada’s primary concern will be avoiding a recession.

U.S. Federal Reserve Chairman Ben Bernanke has stated that the effect of falling off the fiscal cliff over the course of the full year would be 4-5 per cent of the U.S. GDP. If that were to happen, Flaherty said, Canada would fall into a recession "before too long."

Though he issued warnings, Flaherty downplayed the term "fiscal cliff."

"It is a decline, you know -- it’s not really a cliff," Flaherty said, adding he’s hopeful congress will "sort it out" in January and February.

"I do talk to (U.S. Secretary of Treasury Tim) Geithner, I do talk to Republican members of Congress," Flaherty said. "There has been some progress and so I'm hopeful that they’ll at least patch it for the New Year and then move to a genuine solution for the longer term."

Flaherty said the real concern lies in the potential for uncertainty in business markets.

"The equity goes up and down, they’ll bounce around. But we really need all the capital that’s sitting in American businesses and on the balance sheets of Canadian businesses to be invested in our economies because that’s where the growth was going to come from," Flaherty said.

  • Watch the complete interview with Question Period host Kevin Newman on CTV Sunday at 11 a.m. in Ontario, Quebec & Manitoba; noon in Atlantic Canada, 2 p.m. in B.C.; 3 p.m. in Alberta & Saskatchewan

The minister, who is meeting with provincial and territorial finance ministers Sunday and Monday, says a contingency plan is on their agenda and he has confidence ministers will work cohesively.

"The federation does tend to pull together, particularly the finance ministers, because we all deal with the numbers when times get tough. Now, I’m not anticipating the need to do that. I think the Americans will see the light."

While Flaherty took an open, positive stance on Canada's fiscal future, he closed the door on improving the Canada Pension Plan for now, saying the timing is not right.

"The economy is too slow. Our growth is modest. It’s not a time to put another burden on employers or employees."

He said the big issue right now is encouraging Canadians to save for retirement.