Jim O'Neill, Goldman's Top Economist: Canada Is A 'Shining Example' Of How To Avert A Debt Crisis (VIDEO)

Jun 02, 2010 | Updated May 25, 2011

Goldman Sachs's top economist has a message for countries struggling with ballooning deficits: steal a page from Canada's economic playbook.

"Perhaps Canada is a shining example for many countries under pressure," Jim O'Neil told CNBC in an interview this morning. Yesterday, in a sign that its economy has turned a corner, Canada became the first country in the G-7 to raise interest rates since the financial crisis took hold.

Canada, which has been buoyed of late by strong commodity prices, has avoided having any of its banks bailed-out by taxpayers -- thanks, in part to strict regulations of the mortgage market. In the fourth quarter of last year, Canada's economy grew at a solid 5 percent rate.

"It's easy to say every developed country has problems - but Canada doesn't," O'Neill said.

O'Neill added that Canada has its "own severe debt problems, and yet demonstrated that you can undertake supply-side structural reforms."

O'Neill also suggested that Spain, which is suffering under an unemployment rate of 20 percent a faced a downgrade of its credit rating last week, should do its own "full-blown" stress tests to avert a bank panic. O'Neill also added that there are still "deep-seated fragilities" in the Euro.

WATCH the interview: