UK conservatives are studying Canada's past success.

UK conservatives are studying Canada's past success. Canada forced through tough austerity measures back in the early 1990s, which ended up solving its massive debt crisis within just a few years.

Canada faced similar problems to the UK back in 1993. The Wall Street Journal describes how in a June 7 article titled "So, Just What Did Canada Do?":

Taking over as finance minister in 1993, Paul Martin inherited a looming disaster. The government was running a deficit worth 6.6% of GDP. By the following year, gross government debt had hit 101% of GDP, while net debt was over 70%, even as GDP registered a strong rebound – it grew 4.8% in 1994 – from the recession of the early 1990s.

Canadian government spending was cut by 15% (considering inflation) from 1994 - 1996. The budget deficit achieved a surplus in just three years. Canada's crisis disappeared, and in retrospect, it was solved quite easily once tough austerity took place.

So Will the Canada Model Work?

Can the UK, or eurozone nations for that matter, follow Canada's early '90s playbook and fix their debt problems just as easily? The article goes on to explain why it will be far more difficult for them.

Canada had some key advantages back then:

1. A strong global economy in the '90s.
2. Massive consumer demand from a large neighbor like the US.
3. Positive immigration trends which supplied a young and growing population.
4. An era of booming leverage elsewhere compared to an environment of private de-leveraging today.
5. We'll add another -- Canada benefited handsomely from the China-driven global commodities boom.

Taken together, these are some enormous advantages relative to where debt-ridden nations stand today. Nothing is impossible, but we shouldn't expect the smooth ride Canada had.