Canadian Finance Minister Jim Flaherty says Europe’s debt crisis is creating “contagion” outside the region and policy makers must act while the situation can still be “stabilized.”

“Again today, we are staring a crisis in the face,” Flaherty said in the text of a speech he’s giving today in Toronto. “The crisis remains far from resolved.”

European leaders have spent two years struggling to prevent contagion from affecting the region’s largest economies such as France and Germany. Italy had to pay almost 7 percent to sell six-month bills at an auction today, and Germany failed to sell 35 percent of 10-year bonds on offer at a Nov. 23 sale.

“Ongoing uncertainty stemming from the European sovereign and banking crisis is leading to broader contagion outside Europe and global credit markets,” Flaherty said today. “If European authorities move aggressively and with decisiveness to address the crisis and restore financial market stability and confidence, the situation can be stabilized.”

Citizens in many countries face “dire consequences” without a quick solution, including more social unrest and major tax increases, Flaherty said.

While Canada may offer additional stimulus measures if needed, the government won’t resort to “dangerous and risky new spending schemes,” Flaherty said. Canada’s federal and provincial governments must all aim to restore balanced budgets, he said.