Jean Chrétien

reasonJean Chrétien

The Right Honourable Jean Chrétien PC OM CC QC
Chrétien in May 2010
20th Prime Minister of Canada
In office November 4, 1993 – December 12, 2003
Monarch	Elizabeth II
Governors General	Ray Hnatyshyn Roméo LeBlanc Adrienne Clarkson
Deputy	Sheila Copps (1993–1996, 1996–1997) Herb Gray (1997–2002) John Manley (2002–2003)
Preceded by	Kim Campbell
Succeeded by	Paul Martin
Leader of the Opposition
In office December 21, 1990 – November 4, 1993
Monarch	Elizabeth II
Prime Minister	Brian Mulroney Kim Campbell
Preceded by	Herb Gray (acting)
Succeeded by	Lucien Bouchard
2nd Deputy Prime Minister of Canada 18th Secretary for External Affairs
In office June 30, 1984 – September 17, 1984
Prime Minister	John Turner
Preceded by	Allan MacEachen
Succeeded by	Erik Nielsen (Deputy PM) Joe Clark (External Affairs)
7th Minister of Energy, Mines and Resources
In office September 10, 1982 – June 30, 1984
Prime Minister	Pierre Trudeau
Preceded by	Marc Lalonde
Succeeded by	Gerald Regan
36th Minister of Justice
In office March 3, 1980 – September 9, 1982
Prime Minister	Pierre Trudeau
Preceded by	Jacques Flynn
Succeeded by	Mark MacGuigan
27th Minister of Finance
In office September 16, 1977 – June 4, 1979
Prime Minister	Pierre Trudeau
Preceded by	Donald Stovel Macdonald
Succeeded by	John Crosbie
4th Minister of Industry, Trade and Commerce
In office September 14, 1976 – September 15, 1977
Prime Minister	Pierre Trudeau
Preceded by	Don Jamieson
Succeeded by	Jack Horner
3rd President of the Treasury Board
In office August 8, 1974 – September 13, 1976
Prime Minister	Pierre Trudeau
Preceded by	Charles Drury
Succeeded by	Bob Andras
2nd Minister of Indian Affairs and Northern Development
In office July 5, 1968 – August 7, 1974
Prime Minister	Pierre Trudeau
Preceded by	Arthur Laing
Succeeded by	Judd Buchanan
13th Minister of National Revenue
In office January 18, 1968 – July 5, 1968
Prime Minister	Lester B. Pearson Pierre Trudeau
Preceded by	Edgar Benson
Succeeded by	Jean-Pierre Côté
Minister without portfolio
In office 1967 – January 18, 1968
Prime Minister	Lester B. Pearson
Member of Parliament for Saint-Maurice
In office October 25, 1993 – December 12, 2003
Preceded by	Denis Pronovost
Succeeded by	Marcel Gagnon
Member of Parliament for Beauséjour
In office December 10, 1990 – October 25, 1993
Preceded by	Fernand Robichaud
Succeeded by	Fernand Robichaud
Member of Parliament for Saint-Maurice—Laflèche (1963–1968) Saint-Maurice (1968–1986)
In office April 8, 1963 – February 27, 1986
Preceded by	Gérard Lamy
Succeeded by	Gilles Grondin
Personal details
Born	Joseph Jacques Jean Chrétien (1934-01-11) January 11, 1934 Shawinigan, Quebec, Canada
Political party	Liberal
Spouse	Aline Chrétien
Relations	Michel Chrétien (brother) Raymond Chrétien (nephew)
Children	Hubert Chrétien, Michel Chrétien, and France Chrétien Desmarais
Residence(s)	Shawinigan, Quebec
Alma mater	Université Laval
Occupation	Lawyer
Signature

Joseph Jacques Jean Chrétien PC OM CC QC (born January 11, 1934) known commonly as Jean Chrétien (French pronunciation: [ʒɑ̃ kʁetjɛ̃]) is a Canadian politician and statesman who served as the 20th Prime Minister of Canada. He served in the position for over ten years, from November 4, 1993 to December 12, 2003.

Born and raised in Shawinigan, Quebec, Chrétien is a law graduate from Université Laval. He was first elected to the Canadian House of Commons in 1963. He served in various cabinet posts under prime minister Pierre Trudeau, most prominently as Minister of Justice, Minister of Finance, and Minister of Indian Affairs and Northern Development. He also served as deputy prime minister in John Turner's short-lived government. He became leader of the Liberal Party of Canada in 1990, and led the party to a majority government in the 1993 federal election. He was re-elected with further majorities in 1997 and 2000.

Chrétien was strongly opposed to the Quebec sovereignty movement and supported official bilingualism and multiculturalism. He won a narrow victory as leader of the federalist camp in the 1995 Quebec Referendum, and then pioneered the Clarity Act to avoid ambiguity in future referendum questions. He also advanced the Youth Criminal Justice Act in Parliament. Although his popularity and that of the Liberal Party were seemingly unchallenged for three consecutive federal elections, he became subject to various political controversies in the later years of his premiership. He was accused of inappropriate behaviour in the Sponsorship scandal, although he has consistently denied any wrongdoing. He also became embroiled in a protracted struggle within the Liberal Party against long-time political rival Paul Martin. He resigned as prime minister in December 2003, and left public life. In retroactive polling, Chrétien ranks highly among both scholars and the public.

Early life

Chrétien was born on January 11, 1934, in Shawinigan, Quebec, as the 18th of 19 children (10 of whom did not survive infancy) to Wellie Chrétien and Marie (née Boisvert). As a young boy, his father made him read the dictionary. As a young man, Chrétien was well known for his love of violence, and as someone who relished his reputation as a local tough guy who was most happy when punching out his fellow students. One of Chrétien's classmates recalled that he was much feared on the account of his "atrocious temper". Chrétien attended Séminaire Saint-Joseph de Trois-Rivières and studied law at Université Laval. As a student at Trois-Rivières, Chrétien later recalled that his best day at that school was his first day when he attacked without provocation another student taller than himself, leading him to proudly remember that: "I really socked it to him bad. In front of everybody!". Chrétien recalled that his assault was meant to send the message to the other students: "Don't mess with Chrétien!". When asked in an interview by his biographer Lawrence Martin about what subject he was best at in high school, Chrétien replied: "It was street fighting that I was best at". He later made light of his humble origins, calling himself "le petit gars de Shawinigan", or the "little guy from Shawinigan". In his youth he suffered an attack of Bell's palsy, permanently leaving the left side of his face partially paralyzed. Chrétien used this in his first Liberal leadership campaign, saying that he was "One politician who didn't talk out of both sides of his mouth." He is also deaf in one ear. On September 10, 1957, he married Aline Chainé. They have two sons (Hubert and Michel Chrétien) and one daughter (France).

Early political career

Chrétien practised law at the Shawinigan firm of Alexandre Gélinas and Joe Lafond until he was first elected to the Canadian House of Commons as a Liberal from the riding of Saint-Maurice–Laflèche in the 1963 election. He represented this Shawinigan-based riding, renamed Saint-Maurice in 1968, for all but eight of the next 41 years. Early in his career, Chrétien was described by Dalton Camp as looking like "the driver of the getaway car", a condescending assessment which stuck with him, and which was often cited by journalists and others throughout his career, and usually considering his eventual success.

After re-election in the 1965 election, he very briefly served as parliamentary secretary (junior minister) to Prime Minister Lester B. Pearson in 1965 and then starting in 1966 served for a more substantial period of time as the parliamentary secretary to Minister of Finance, Mitchell Sharp. Sharp was to serve as Chrétien's mentor and patron, and it was largely through Sharp's influence that Chrétien rose up the ranks. Like his mentor Sharp, Chrétien was identified with the right wing of the Liberal Party in the 1960s, and it was not until the 1970s that Chrétien first started to become identified with the left-wing of the Liberals. Sharp was quoted as saying about his protégé in an interview with Peter C. Newman:

"Jean is not accustomed to reading as much as I am or you are, and therefore we tend to judge him on that sort of basis. We read all sorts of things; Chrétien doesn't. Chrétien's reading is limited. He has an instinctive approach, and faced with a problem, he's always comes out with sensible answers, and that's why I say he never has to eat his words".

He was selected for appointment as Minister of National Revenue in January 1968 by Pearson, making him a junior minister in the cabinet. During the 1968 Liberal leadership race, Chrétien fought hard on behalf of his mentor Sharp, who aspired to lead the Liberal Party. Only at the last moment when it become clear that Sharp had no hope of winning the Liberal leadership just before the convention and after Sharp withdrew from the race, did Chrétien follow Sharp in swinging his support behind the man who eventually won the race, Pierre Trudeau.

Chrétien, second from right as a minister in Lester Pearson's Cabinet in 1967. From left to right, Pierre Trudeau, John Turner, Chrétien, and Pearson. All four men would eventually serve as Prime Minister.

After the June 1968 election, he was appointed Minister of Indian Affairs and Northern Development largely because of the influence of Sharp, who had persuaded Prime Minister Pierre Trudeau that Chrétien was worthy of a senior portfolio in the cabinet. Trudeau and Chrétien were never close or even friendly as the gulf between the intellectual Trudeau and the decidedly non-intellectual Chrétien was too wide, but Trudeau did value Chrétien as an extremely loyal and competent minister, and as a "tough guy" trouble-shooter who could handle difficult assignments. Chrétien was never a member of Trudeau's inner circle, but his status as the "enforcer" of the Trudeau government meant he often played a key role in executing the policy decisions of the Trudeau government. Chrétien's most notable achievement at Indian Affairs was the 1969 White Paper, a proposal to abolish the Indian Act. The paper was widely opposed by First Nations groups, and later abandoned.

During the October Crisis, Chrétien told Trudeau to "act now, explain later", when Trudeau was hesitant to invoke the War Measures Act. 85% of Canadians agreed with the move. In the 1972 election, Chrétien, who was frightened by a near-defeat in 1968, had a friend Antonio Genest win the Progressive Conservative nomination, and then run a deliberately inept campaign in order to ensure his re-election. In 1974, he was appointed President of the Treasury Board; and beginning in 1976, he served as Minister of Industry, Trade and Commerce. In 1977, following the resignation of Finance Minister Donald MacDonald, Chrétien succeeded him. He was the first francophone Minister of Finance, and remains one of only three francophones to have held that post. Chrétien's time at Finance highlighted his "enforcer" status, namely as someone who often helped to execute Trudeau's policies, but who rarely helped Trudeau to make policy. During his time at Finance, Trudeau completely excluded Chrétien from any role in making financial policy, instead expecting Chrétien to simply carry out the policies that he and his advisors at the PMO had decided beforehand without consulting Chrétien at all. In 1978 Trudeau announced in a press interview $2 billion in cuts without bothering to inform Chrétien beforehand about what he had decided to do, who was left looking clueless in the resulting press interview. Chrétien found this experience so humiliating that he seriously considering resigning in protest.

Minister of Justice and Energy Minister

The Liberals lost the federal election of May 1979 to a minority Conservative government led by Joe Clark. When Pierre Trudeau regained power in February 1980, he appointed Chrétien Minister of Justice and Attorney General of Canada. In this role, he was a major force in the 1980 Quebec referendum, being one of the main federal representatives "on the ground" during the campaign. His fiery and emotional speeches would enthrall federalist crowds with his blunt warnings of the consequences of separation. During the 1980 referendum, Chrétien fiercely fought behind the scenes with the leader of the Quebec Liberals, Claude Ryan, who served as the chairman of the non committee about the best course to follow, with Ryan favoring a more Quebec nationalist message as opposed to Chrétien's unabashed Canadian nationalist message. He also served as Minister of State for Social Development and Minister Responsible for Constitutional Negotiations, playing a significant role in the patriation struggle of 1980–81 which led to the Constitution of Canada in 1982. He was the chief negotiator of what would be called the "Kitchen Accord", an agreement which led to the agreement of nine provinces to patriation. His role in the dealings, however, would not be forgotten in his native province of Quebec, which did not ratify the Constitution Act of 1982 (although the Supreme Court of Canada ruled that Quebec was bound by it). In 1982, Chrétien was appointed Minister of Energy, Mines and Resources. As Energy Minister, Chrétien was in charge of enforcing the National Energy Program (NEP), a role that helped to make him a hate figure in Alberta. Chrétien himself was doubtful about the value of the NEP, saying at the time of his appointment as Energy Minister that "We've got to back off on the NEP without destroying our credibility" but upon learning that Trudeau and his right-hand man, Finance Minister Marc Lalonde, were in favor of continuing the NEP, Chrétien decided to fall in line rather than risk his chances of one day winning the Liberal leadership. Chrétien's battles with Alberta premier Peter Lougheed over the NEP helped to confirm his disdain for provincial politicians whom he saw as petty people only interested in their own provinces at the expense of the nation.

1984: Chrétien's first bid for the Prime Ministership

After Trudeau announced his retirement in early 1984 as Liberal Party leader and Prime Minister, Chrétien sought the leadership of the Liberal Party of Canada. The experience was a hard one for Chrétien, as many of his longtime Cabinet allies supported the bid of John Turner who was viewed as the more electable candidate, much to Chrétien's intense disappointment. During the 1984 leadership race in the spring of 1984, Chrétien ran as the defender of the Trudeau era and promised to continue all of Trudeau's policies, unlike Turner who promised a break with Trudeau. During the leadership race, Chrétien presented himself as a folksy leftish populist who mocked Turner as a right-wing Bay Street snob out of touch with ordinary people. Chrétien argued contra Turner that the national deficit was not a problem, saying in a speech that "We have to use the deficit to keep the dignity of our people". Through Chrétien ran the arguably better campaign, attracting larger and more enthusiastic crowds than anything that Turner ever managed, the fact that most of the Liberal Party establishment had rallied to Turner when he announced his candidacy in March 1984 as the most candidate perceived as the most electable proved to be an insurmountable handicap for Chrétien. Two leading power-brokers within the Liberal Party, Marc Lalonde and Senator Keith Davey aka "the Rainmaker" backed Turner in 1984 as they considered Chrétien to be too "downmarket" and viewed Turner, the glamorous "golden boy" jock-scholar untainted by involvement with Trudeau in his unpopular last years as the best one to win the election. Chrétien was thought to be a dark horse until the end, but lost on the second ballot to Turner at the leadership convention that June. Iona Campagnolo would ominously introduce Chrétien as, "Second on the ballot, but first in our hearts." Chrétien believed that he would win the 1984 leadership race right up to the moment that Turner won, and took his defeat very badly when it came. When Chrétien did finally lose to Turner, he saw himself as the victim of a monstrous injustice-believing that Turner had only won through backroom machinations to cheat him out of what he saw as being rightfully his-and proved to be incapable of forgiving Turner for defeating him. Turner personally appointed him Deputy Prime Minister, and selected him for appointment by the Governor General as Secretary of State for External Affairs (foreign minister).

After winning the leadership race, Turner wanted a reconciliation with Chrétien in order to lead a united party into the coming general election, and asked Chrétien for what terms could a reconciliation be forged. Chrétien, angry about losing the leadership race, asked for terms that he knew that Turner could never give him, demanding that he be appointed Quebec lieutenant with control of patronage and organization in Quebec, a position that Turner had already promised to give to André Ouellet in exchange for backing him in the leadership race. Chrétien's demand to be appointed Quebec lieutenant proved to be impossible to meet as it would force Turner to break his promise to Ouellet, and so Turner compromised by creating a troika to run Liberal operations in Quebec comprising Chrétien, Ouellet and Lalonde. The troika was a sham, and during the 1984 general election, the three members of the troika spent more time feuding with one another than in combating the Conservatives. Chrétien's demand for the Quebec lieutenancy was not the only thing that divided him from Turner. As almost immediately, Chrétien and Turner clashed over the issue of an early election. Chrétien advised Turner not to ask the Governor-General to dissolve Parliament, but rather keep Parliament in session for the fall of 1984 in order to give the government a record to run on for a winter election in early 1985 (an election had to be called no later than February 1985 as the last election was in February 1980). Turner for his part believed that a boost in the polls after he become Prime Minister in late June 1984 justified asking for Parliament to be dissolved for an election in September 1984, so Chrétien's advice was disregarded. Relations between the two were strained, especially after the Liberals were severely defeated in the 1984 election. He was one of only 17 Liberal MPs elected from Quebec (the party had won 74 out of 75 seats in 1980). He was also one of only four MPs from the province elected from a riding outside Montreal.

The 1986 Leadership review and after

Chrétien was a major focal point of dissatisfaction with Turner, with many polls showing his popularity. His 1985 book, Straight from the Heart, recounted his early life in Shawinigan, his years spent in the Canadian House of Commons as both a Member of Parliament and Cabinet Minister, and his failed 1984 leadership bid. It was an instant best-seller. In a 1985 interview, Frank Moores told Peter C. Newman:

"I was down fishing with Chrétien last week, and he really hates Turner with a passion. He might be interested in joining the Tories if Turner is re-elected Liberal leader, although it would take a lot of discussion."

Ed Broadbent later recalled that Chrétien harboured a marked degree of animosity towards Turner and that "I noticed that any negative comment Chrétien could make about John Turner in the lobbies, he would do it. I didn't like that".

In February 1986, Chrétien whose relations with Turner were very poor, resigned his seat and left public life for a time. On February 27, 1986, Chrétien accompanied by his special executive assistant Jean Carle went to Turner's office to hand in his resignation. Turner forced Chrétien to wait a considerable period of time, during which Carle broke down in tears while Chrétien was visibly angry when Turner finally received them, making for a tense and barely civil meeting. Chrétien's resignation was largely motivated by his desire to better organise against Turner in the leadership review due in the fall of 1986. Now working in the private sector again, Chrétien sat on the boards of several corporations, including the Power Corporation of Canada subsidiary Consolidated Bathurst, the Toronto-Dominion Bank, and the Brick Warehouse Corporation. Though Chrétien professed to be retired from politics, he told reporters within days of his retirement that: "I will always be a politician. I love politics". Crucially, Chrétien did not disband the campaign organization that he founded in 1984 which suggested that his retirement was always intended to be temporary. In November 1986 when the Liberals held a leadership review, Chrétien attempted to organise against Turner, which led to a bruising battle between factions loyal to the two men. To topple Turner, Chrétien used Turner's penchant for heavy drinking to spread rumors that Turner was an alcoholic who was simply too drunk most of the time to effectively lead the Liberals to power. Chrétien formally claimed to be neutral on the question of the leadership review of Turner's management of the Liberal Party, but behind the scenes Chrétien lobbied as many Grit MPs and senators as possible for their support in bringing down Turner. Two Liberal leading power-brokers Marc Lalonde and Senator Keith Davey aka "the Rainmaker" both backed Turner in 1984, and in the aftermath of the 1984 election, Lalonde and Davey decided they had made a huge mistake with Turner, which they were determined to rectify in 1986 by installing Chrétien as the leader best able to return the Liberals to power. The intense emotions stirred up by the 1986 leadership review were well-illustrated when Chrétien arrived to vote in the review, which led a "chaotic melee" on the convention floor at the Ottawa Convention Centre as pro-Turner and pro-Chrétien Liberals fought one another with their fists, and led to the police being called to end the violence. Turner won the leadership review by the mass signing up of immigrants as "instant Liberals" who provided a loyal bloc of delegates. It is quite likely that without the support of the "instant Liberals", Turner would have lost the leadership review as many within the Liberal Party were deeply angry at him for losing the 1984 election. Many Liberals believed if only Chrétien had won the 1984 convention instead of Turner, that they would not have lost the 1984 election, or at least not as badly.

The Chrétien-Turner feud was only just the beginning of Liberal in-fighting. The PC Prime Minister Brian Mulroney's two signature policies of the late 1980s, namely free trade with the United States and the Meech Lake accord had badly fractionised the Liberals in ways that cut across traditional left-right lines, which was at least part of Mulroney's intention in introducing them, to use them as wedge issues to unite the PC base and divide the Liberals. The Liberal strategist John Duffy illustrated how badly Meech and free trade had fractionized the Liberals by pointing out the positions on each of four prominent Liberals of the late 1980s, namely the leftist Sheila Copps (anti-free trade, pro-Meech), the rightist Don Johnston (pro-free trade, anti-Meech), rightist Raymond Garneau (pro-free trade, pro-Meech) and the leftist Lloyd Axworthy (anti-free trade, anti-Meech). This was to be the context of Chrétien's return to politics in 1990.

In April 1988, a group of Liberal MPs who had strongly supported Chrétien in 1984 and in 1986 attempted to depose Turner as party leader, a coup that misfired, but still had the effect of damaging Turner's leadership. Speaking about the repeated attempts to depose Turner as a leader in favor of Chrétien in the 1980s, David Collenette stated in an interview that "A lot of things were going on which I don't even want to talk about". Chrétien's status as an alternative leader-in-waiting again came to the fore in mid-October 1988 during the 1988 election, when several senior Liberals such as Senator Michael J. L. Kirby and André Ouellet were caught thinking aloud that the best way to win the election was to depose Turner and install Chrétien as the new leader, a "crazy plan born of panic" according to the Liberal strategist John Duffy that came to nothing, but nonetheless showed how widespread the feeling had become that only Chrétien could win the Liberals power again.

Winning the Liberal leadership, 1990

Chrétien in 1980

After Turner's resignation as leader in 1990, Chrétien announced he would run for the party leadership at the June 1990 Liberal leadership convention in Calgary, Alberta. At a press conference in Ottawa on January 23, 1990, Chrétien declared that he would run to be Liberal party leader, proudly stating to the assembled reporters that this day would be remembered as the beginning of the "Chrétien era" in Canada.

Chrétien's principal opponent, Paul Martin, was generally seen as the ideological heir to John Turner, while Chrétien was the ideological heir to Trudeau. The fact that most of the Liberals who supported Turner in the 1980s supported Martin in 1990 confirmed Chrétien's disdain for Martin, whom he saw as a Bay Street "big shot" like Turner. Patrick Lavelle, who ran Chrétien's campaign in Ontario later stated in an interview: "I don't think Chrétien had any warm feelings about Martin-ever!".

The most controversial issue facing Canada in the first half of 1990 was the Meech Lake Accord. The Meech Lake accord of 1987 proposed a set of constitutional amendments that would have seen a significant devolution of federal powers to the provinces and a clause that would have recognized Quebec as a "distinct society" within Canada. Chrétien had announced in a speech in January 1990 that he was an opponent of Meech Lake, but stated that he would support the accord with amendments such as scrapping the controversial "distinct society" clause as written, instead have the preamble to the constitution declare that Quebec was a “distinct society” and adding in a new clause saying if any conflict arose between the constitutional recognition of Quebec as a “distinct society” and the Charter of Rights and Freedoms, the latter would always prevail. The “distinct society” clause theoretically could have been the basis of a wide-ranging devolution of federal power as potentially it could have empowered the Quebec government to pass any law short of secession to protect the “distinct society”, which is why the “distinct society” clause was so popular in Quebec while arousing such passionate opposition amongst many quarters in English Canada. Chrétien's proposed amendments would have meant that the constitution would have recognized Quebec as a “distinct society” while effectively gutting any attempt to use the constitutional recognition of Quebec as a “distinct society” to grant special powers to Quebec. In private, Chrétien was opposed to Meech, but as the accord was extremely popular in Quebec, to run as an out-and-out opponent of Meech was judged to be too risky politically, hence Chrétien's conditional opposition to Meech Lake. Meech placed Chrétien in a difficult position as it was very popular in Quebec while being loathed by the Trudeau wing of the Liberals whose support Chrétien also needed. Chrétien had tried to avoid talking about Meech as much as possible as it was a minefield issue for him, and instead stuck to generalities about national unity. Martin by contrast had declared himself an unconditional supporter of Meech Lake as it was, and was quite willing to talk about his support for Meech.

Chrétien's key campaign man was Jim Karygiannis who became a living legend within the Liberal Party due to his ruthlessness. Chrétien told Lavelle that what he wanted was "A tough guy. A guy who could go on a search-and-destroy mission, who could do a kamikaze raid for our side", and decided that Karygiannis was that man. At a meeting to select Liberal delegates for the Kitchener-Waterloo riding, Martin's supporters attempted to call on the pay phones as many potential Martin supporters as possible to come to the meeting, which led Karygiannis to put chewed gum into all of the pay phone coin slots, and thereby won Kitchener-Waterloo for Chrétien. At another delegate selection meeting, Karygiannis verbally attacked a pro-Martin Liberal official with such rage that the man was hospitalized for angina. Karygiannis specialised in signing up immigrants to serve as delegates for Chrétien, and personally signed up himself 9, 500 immigrants as Chrétien delegates between January–June 1990, leading one pro-Martin official to lament that "We were getting Greeked. And if we weren't getting Greeked, we were getting Sikhed". Karygiannis later boosted in an interview that "I signed up anything that moved". Chrétien is said to praised have Karygiannis with the remark "Whatever it takes to win, Jimmy, whatever it takes to win". In large part because of Karygiannis and his team, by late April 1990 Chrétien had signed up 1, 500 delegates to Martin's 500 delegates, making him the clear front-runner.

A key moment in that race took place at an all-candidates debate in Montreal on June 2, 1990, where the discussion quickly turned to the Meech Lake Accord, which had emerged as the major policy issue that divided Martin and Chrétien. At the debate on June 2, 1990, Martin attempted to force Chrétien to abandon the latter's nuanced position on Meech Lake and speak out for or against it, arguing that his position of opposing Meech Lake as it is, but with willing to support with amendments was attempting to have it both ways. When Chrétien refused to endorse Meech as it was, young Liberal delegates crowding the hall began to chant "vendu" ("sellout" in French) and "Judas" at Chrétien. In private, Chrétien was deeply enraged by the incident, and claimed that the delegates shouting vendu at him were actually Martin supporters from Toronto, charging that their poor French had betrayed that they were not from Quebec. Martin denied involvement in 'coordinating' any response from the floor, or a similar outburst by his supporters at the convention.

The differences between Martin and Chrétien on Meech Lake mirrored those between Turner, who had signed and voted for Meech Lake in 1987 and Trudeau who from his retirement had been a ferocious critic of Meech. The Canadian political scientist Brooke Jeffrey argued that the real divisions within the Liberal Party were not so much between right and left (through such divisions did exist), but rather between those wanted a strong federal government and those who did not. There were "hard federalists" like Trudeau and Chrétien who favored a highly centralised federation with a powerful federal government and weak provincial governments as the best way of maintaining national unity vs. "soft federalists" like Turner and Martin who claimed that an over-mighty federal government would alienate people, especially in Quebec, and accordingly wanted a decentralised federation with federal power devolved down to the provinces. One of Chrétien's aides David Zussman recalled about Chrétien's plans for the Confederation that: "I think he's a centralizer. He sees a very vigorous role for the federal government". Ultimately, Chrétien defeated Martin on the first and only ballot. However, the Meech Lake question irreversibly damaged Chrétien's reputation in his home province.

Leader of HM Official Opposition

As his victory at the convention on June 23, 1990 occurred on the same day that the Meech Lake accord died, Chrétien was heavily criticized in the Quebec media for his opposition to Meech Lake. Photographs of Chrétien embracing Newfoundland Premier Clyde Wells, a prominent opponent of Meech at the convention attracted much negative comment in Quebec. His leadership was also shaken by the defection from the caucus of francophone MPs (and Martin loyalists) Jean Lapierre and Gilles Rocheleau, who claimed that they could not serve under the anti-Meech Chrétien and so left to join the newly founded Bloc Québécois. In a by-election for Laurier—Sainte-Marie on August 13, 1990, Chrétien's hand-picked candidate, Denis Coderre was badly defeated by the Bloc Québécois's Gilles Duceppe, costing the Liberals a riding that they had held since 1917; many attributed this to Chrétien's opposition to the Meech Lake Accord. Chrétien appeared indecisive in the Oka Crisis, having almost nothing to say about the stand-off at Oka for the first two months of the crisis, which began on July 11, 1990. When Chrétien finally did call a press conference about the Oka crisis on September 23, 1990, Chrétien declared that he could not answer certain questions about First Nations land claims because "I'm not a lawyer", which prompted widespread ridicule as Chrétien had been a member of the Quebec Bar Association since 1958. The federal Liberals were disorganized and dropped in the polls from 50% in June 1990 to 32% in September. Upon becoming Liberal leader, Chrétien appointed his friend Eddie Goldenberg as his chief of staff, and formed a leadership team comprising John Rae and David Zussman as his policy advisors, his "surrogate son" Jean Carle as his special executive assistant, George Radwanski as his speech-writer. All of the Chrétien leadership team that was created in 1990 were later to play prominent roles in the omnipotent Prime Minister's Office (PMO) during Chrétien's time as Prime Minister.

In September 1990 Chrétien seeing a chance to make a strong impression on public opinion after a shaky start as a leader reaped a major windfall after Mulroney introduced an unpopular Goods and Services Tax (GST), which Chrétien decided to vigorously oppose. Traditionally in Canada the government had levied a 13.5% Manufacturer's Sales Tax (MST), which was paid by manufacturers', who passed on the cost of the tax to consumers in the form of higher prices. Since foreign manufacturers did not pay the MST, this placed Canadian companies at a competitive disadvantage in their home market, and to compensate the government had levied tariffs on manufactured imports to maintain a level playing field. When the free trade agreement with the United States came into effect in 1989, the government could no longer levy tariffs on American imports, which led to furious complaints from Canadian industry about having to compete with American companies who did not pay the MST. To save Canadian industry and the jobs of those Canadians employed in manufacturing from being destroyed by American competition, the Mulroney government decided in late 1989 to abolish the MST and replace it with the 7% GST, whose costs would be borne by consumers. On the proposed GST, Chrétien was torn between his belief that the GST was economically necessary vs. his desire to score political points by opposing a proposed tax that most Canadians hated, and as such, he was initially vague about where he stood about the GST. It was only in September 1990 after months of vacillation did Chrétien finally make up his mind to oppose the GST. Chrétien's decision to oppose the GST in 1990 was taken for reasons of political expediency rather than for principle, namely that Chrétien needed an issue to oppose the government on that would allow him to connect with the public; sources close to Chrétien were later to claim that he had wanted to support the GST bill, but had been forced by his caucus against his will to oppose it. At a Liberal event in the fall of 1990, Chrétien stated that if he became Prime Minister "the Mulroney GST will disappear", going on to say: "I am opposed to the GST. I have always been opposed to it. And I will be opposed to it, always". To capitalise on widespread public dislike on the proposed GST, Chrétien ordered the Liberal-dominated Senate to defeat the GST bill in late September 1990, leading Mulroney on September 27, 1990 to appoint 8 Conservative senators to give the Tories a majority using a never before used section of the Constitution Act, the so-called "Deadlock Clause". At that point, Chrétien ordered the Liberal senators to filibuster the GST bill, reducing the Senate to scenes of chaos for the entire fall of 1990. On October 24, 1990, a poll revealed that the Liberals had fallen behind the New Democrats, which Chrétien admitted in an interview might had something to do with the scenes of obstructionist, often childish behavior by the Liberal senators. Finally on December 13, 1990, the Conservative senators changed the procedure rules in the Senate to break the Liberal filibuster and passed the GST bill. Public opinion polls taken in the fall of 1990 showed between 75 to 85 percent of Canadians were opposed to the GST bill, but at the same time, most people wanted an end of the "circus" in the Senate as the Liberal senators filibustered using such tactics such as "...hooting, catcalls, shouting, blowing kazoos, interminable reading of petitions name by name and other delaying measures". Though the often undignified behavior of the filibustering Liberal senators was not popular with the Canadian public, the GST was even more unpopular with 75% of Canadians saying in a 1991 poll that they were hostile to the new tax, which worked to Chrétien' benefit. In order to reinvigorate his leadership and reorganize his office which was in chaos under the leadership of Goldenberg, he hired an old friend and classmate, Jean Pelletier, as his chief of staff in December 1990.

In December 1990, Chrétien returned to the House of Commons after winning a by-election in the safe Liberal riding of Beauséjour, New Brunswick. The incumbent, Fernand Robichaud, stood down in Chrétien's favour, which is traditional practice when a newly elected party leader does not have a seat in Parliament. Initially, Chrétien had planned to wait until the next general election before running, but was advised by Herb Gray that: "To have credibility, you're got to be in the House. You can't afford to wait two more years until a general election". Gray's appeal changed Chrétien's mind about when to seek a seat in the House of Commons.

In October 1991, Chrétien first gave his views about how best to end the recession which had begun in 1990. Chrétien argued that the answer was a policy of slow devaluation where the dollar would be allowed to decline against other major world currencies, which would have the effect of both pricing out foreign imports and by giving Canadian firms a competitive advantage in world markets, boost exports. However, Chrétien concluded that his planned export offensive powered by a low dollar would come to nothing if other nations maintained tariffs to keep Canadian goods out of their markets. In order to make his plans to export Canada back into prosperity work, Chrétien decided that the solution was globalization. Besides for globalization, Chrétien also argued to combat the recession, the federal government needed to make the system of unemployment insurance less generous, and to end the policy of high interest rates maintained by the Bank of Canada governor John Crow to achieve his target of 0% inflation, which Chrétien argued was needlessly crippling the economy.

In November 1991, Chrétien organised a party conference in Aylmer, Quebec where the Liberals formally disallowed most of the economic nationalism and protectionism of the Pearson-Trudeau years, and instead embraced globalization as the cure for the recession of the early 1990s. Reflecting the changed emphasis, at the Aylmer conference, the Liberals declared their support for the 1987 free trade agreement with the United States, which the party had famously promised to tear up if they won the 1988 election, and instead Mulroney was now denounced for not going far enough in opening up the economy by signing more free trade agreements with other nations. Reflecting the changed emphasis, Chrétien in a pointed symbolic move, had the outspoken pro-free trade Liberal Roy MacLaren sitting next to him on his right while the equally outspoken anti-free trade Liberal Lloyd Axworthy sat at some distance from Chrétien on his left. Delivering the keynote speech at the Aylmer conference, Chrétien came out firmly in support of globalization, stating that: "Protectionism is not right wing or left wing. It is simply passé. Globalization is not right wing or left wing. It is simply a fact of life". Chrétien's biographer Lawrence Martin wrote that the Aylmer conference marked Chrétien's first real achievement as Liberal leader, as it was the first time that he put forward a positive vision for Canada, instead of automatically opposing everything that Mulroney was doing without offering a constructive alternative. In an interview with Martin, Chrétien called himself a centrist by inclination, and stated that Aylmer conference was the beginning of his efforts to bring the Grits to the political center.

Chrétien revealed himself to be a staunch "hard federalist" favoring a strong federal government at the expense of the provinces, much along the same lines as his predecessor Trudeau. However unlike Trudeau, Chrétien supported the Charlottetown Accord of August 1992, which proposed devolving federal powers to the provinces and once again recognized Quebec as a "distinct society". At the urging of Pelletier, Chrétien met secretly with Trudeau at the Royal York Hotel in Toronto where the two men argued about the meaning of "distinct society" for more than two hours. While the two did not resolve their differences, Trudeau promised to refrain from undermining Chrétien's authority in public. Trudeau denounced the Accord at the Maison Egg Roll in Montreal on October 1, 1992. Chrétien had major reservations about the Charlottetown accord, but as his opposition to Meech had done him much damage in Quebec, he was anxious not to be seen as an opponent of another set of constitutional amendments designed to secure Quebec's ratification of the 1982 constitution, especially as in many respects Charlottetown was very similar to many of the amendments that Chrétien had proposed to Meech Lake in 1990. Chrétien endorsed the Charlottetown accord on the rather negative grounds that the constitutional debate of the late 1980s-early 1990s were destroying Canada, saying it "was bleeding the nation to death" and that Charlottetown was the best way of ending that debate in order to move political debate back to the economic recession, which had begun in 1990. At a Liberal caucus meeting on September 8, 1992 Chrétien declared that "if we had been the government we would not have made this deal", and that only reason to support Charlottetown was that to reject it would increase support for Quebec separatism. The unity minister Joe Clark recalled that Chrétien did not champion the Charlottetown accord in the 1992 referendum with any great conviction or passion, stating: "We were trying to bring everybody into the tent on it, and I made a practice taking proposals to the other party, particularly Chrétien...I just didn't think he was following the issue...I don't know what it was...But it left me with was the belief that here was a guy for whom the substance of things doesn't matter much." During the 1992 referendum, Chrétien kept a low profile, and delivered only a few speeches in favor of Charlottetown.

When Progressive Conservative Prime Minister Brian Mulroney began to lose ground in the polls, Chrétien was the major beneficiary. In preparation for the 1993 election, Chrétien won the right to have the final say over riding nominations and to veto any candidate that displeased him. Chrétien's use of this power caused some protests within the Liberal Party with John Nunziata publicly complaining that "The backroom guys have taken control of the party. I guess they think they can muzzle us all". Chrétien told one prospective Liberal candidate Hec Clouthier, who informed Chrétien that was probably going to win the nomination to be the Liberal candidate for Renfrew—Nipissing—Pembroke, defeating the incumbent Len Hopkins that: "Well, you might [win the nomination]. But you're not going to get the chance...I am the boss. I have the right to make this decision. I have an agenda for this country. I want to be prime minister and do great things, and I've got to put people in place who I can know can win". Chrétien added that he knew Hopkins could win because he won his seat eight times in a row while Clouthier had no equivalent record. When Clouthier refused to withdraw his candidacy as ordered and looked certain to win the Liberal nomination for Renfrew—Nipissing—Pembroke, he was expelled from the Liberal Party. Chrétien was so confident that he was going to win the 1993 election that he formed his transition team in October 1992 to prepare for the hand-over of power 13 months before it actually happened.

Prime minister (1993–2003)

The 1993 election

Mulroney's approval ratings declined and by 1993 opinion polls showed that his Progressive Conservative Party would almost certainly be defeated by the Liberals under Chrétien in the election due that year. Mulroney announced his retirement in February, and was succeeded by Minister of National Defence Kim Campbell in June. Campbell managed to pull the PCs to within a few percentage points of the Liberals by the time the writs were dropped in September.

Campbell, however, had little luck overcoming the tremendous antipathy toward Mulroney, despite a substantial bounce from the leadership convention. Chrétien saw an opportunity, and on September 19, he dropped a bombshell by releasing the entire Liberal platform. The 112-page document, Creating Opportunity, quickly became known as the Red Book because of its bright red cover. It was a very specific and detailed statement of exactly what a Chrétien government would do in office. The Red Book gave the Liberals the reputation as the party with ideas, since none of the other parties had anything comparable. Paul Martin, the man who led the team that produced the Red Book was less complimentary about the Red Book in private as during his time in office as Finance Minister, he was often reported to have said: "Don't tell me about the Red Book, I wrote the damn thing, and I know that it is a lot of crap!".

The Liberals did not promise to remove the GST altogether as a revenue producing agent. Instead, the Red Book pledged to replace the GST "with a system that generates equivalent revenues, is fairer to consumers and to small business, minimizes disruption to small business, and promotes federal-provincial fiscal cooperation and harmonization." The full implications of the Red Book's promise to replace the GST by combining the federal and provincial sales taxes, namely an increase in the sales tax rate above the 7% rate set by the hated GST was not spelled out by the Red Book. Through the Red Book did not promise to abolish the GST, Liberal candidates were often less circumspect on the campaign trail with many giving the impression that a Liberal government would abolish the GST with for instance, Sheila Copps famously promising to resign within a year of taking office if the GST was not repealed.

Chrétien promised to renegotiate of the North American Free Trade Agreement (NAFTA), and reform to the unemployment insurance system. In regards to NAFTA, the Red Book pronounced itself in favor of a North American free trade zone in principle, but went on to accuse Mulroney of having given away too much to the Americans and Mexicans when he signed NAFTA in 1992, and stated that the Liberal government would renegotiate NAFTA on more favorable terms to Canada within six months of taking office. Failing that, the Red Book promised that Canada would renounce NAFTA. The main emphasis in the Red Book was on a promise to spend $6 billion on improving infrastructure in a Keynesian move to fight the recession of the early 1990s. As regarding the debt situation, Chrétien promised in the Red Book to reduce Canada's deficit to 3 per cent of GDP (the same debt to GDP ratio required to enter the European Union) within three years of taking office. Chrétien made it clear that the 3% deficit to GDP ratio would apply only to the federal government, whereas the Maastricht Treaty of 1991 which set out the 3% deficit to GDP ratio in order to enter the European Union stated that this applied to all levels of government. The Red Book went on to promise that a Liberal government would achieve its goal of reducing the deficit to 3% of the GDP by cancelling the contract to buy the Sea King helicopters and to privatise Pearson airport in Toronto and by eliminating unspecified "waste" in the government. After the 3% target had been achieved within the first three years of taking office, the Red Book promised that the deficit would be eliminated at some unspecified time in the future. Martin, who had been the leader of the team that had produced the Red Book had wanted to promise to eliminate the deficit altogether, but had been overruled by Chrétien, who had wanted to present the Liberals as the "caring" party that would defend social programs, unlike the "heartless" Tories and the Reform Party who Chrétien claimed wanted to eliminate the deficit within two or three years by gutting social programs with no thought for any suffering that this might cause. Chrétien claimed in his campaign speeches that Reform's plans for eliminate the deficit within two or three years of taking office would cause at least a 25% unemployment rate, if not higher, which Chrétien claimed starkly in a series of speeches would cause a bloody "revolution". Chrétien had personally chosen the target of reducing the deficit to 3% of GDP as it made the Liberals seemed fiscally responsible while at the same time promised that the Liberals would not inflict too much economic pain to achieve that fiscal responsibility. One Liberal candidate Herb Dhaliwal recalled that for Chrétien at time of the 1993 election that the national deficit was not a major issue and that: "His attitude was that the deficit is ok as long as you can manage it". To support its economic claims, the Red Book gave costs for each of the Liberals' policy goals – the first time a Canadian party had gone to such lengths to prove that its proposals were fiscally responsible.

During the 1993 election campaign, Chrétien criticized the Conservative government for planning to spend $5.8 billion to replace the Canadian Forces' aging fleet of Labrador and Sea King helicopters. The aircraft were used for maritime surveillance, search and rescue and anti-submarine warfare operations. The helicopters were 20 to 30 years old, typically required 30 hours of maintenance for every hour in the air, were frequently grounded for repairs and required many expensive custom-made parts for their obsolete machinery. The government's announced choice of the EH-101 was derided by Chrétien as an overly-expensive "Cadillac" aircraft.

By late September 1993, the Liberals quickly surged to a double-digit lead in most opinion polls in large part because of the Red Book. By October, it was obvious that the Liberals would win at least a minority government. Even at this stage, however, Chrétien's personal approval ratings were far behind those of Campbell. Realizing this, the Tory campaign team released a series of ads attacking Chrétien. The ads were viewed as a last-ditch effort to keep the Liberals from winning a majority. The second ad, released on October 14, appeared to mock Chrétien's facial paralysis, and generated a severe backlash from all sides. Even some Tory candidates called for the ad to be yanked. Campbell was not directly responsible for the ad, and ordered it off the air over her staff's objections. However, she did not apologize and lost a chance to contain the fallout from the ad.

Chrétien, taking advantage of the furor, likened the Tories to the children who teased him when he was a boy in Shawinigan. "When I was a kid people were laughing at me," he said at an appearance in Nova Scotia. "But I accepted that because God gave me other qualities and I'm grateful." The speech, which one Tory described as one Chrétien had waited his whole life to deliver, moved many in the audience to tears. Chrétien's approval ratings shot up, nullifying the only advantage the Tories still had over him.

On October 25, the Liberals were elected to a strong majority government, winning 177 seats – the third-best performance in the Liberals' history, and their most impressive win since their record of 190 seats in 1949. The Tories were nearly wiped out, winning only two seats in the worst defeat ever suffered by a governing party at the federal level. Chrétien himself yielded Beauséjour back to Robichaud in order to run in his old riding, Saint-Maurice. However, he was unable to lead the Liberals back to their traditional dominance in Quebec. He was one of only four Liberal MPs elected from that province outside the Montreal area. With few exceptions, most of the support that had switched from the Liberals to the Tories nine years earlier flowed to the Bloc, which became the Official Opposition.

First mandate (1993–1997)

On November 4, 1993, Chrétien was appointed by Governor General Ray Hnatyshyn as prime minister. While Trudeau, Joe Clark and Mulroney had been relative political outsiders prior to becoming prime minister, Chrétien had served in every Liberal cabinet since 1965. This experience gave him knowledge of the Canadian parliamentary system, and allowed Chrétien to establish a very centralized government that, although highly efficient, was also lambasted by critics such as Jeffrey Simpson and the media as being a "friendly dictatorship" and intolerant of internal dissent. The political scientist Donald Savoie wrote that under Chrétien's authoritarian style of leadership that "Cabinet has now joined Parliament as an institution being by-passed" while Simpson wrote that Chrétien possessed " a streak of terrible pettiness and vengeance directed against those who have crossed him". Reflecting the relative impotence of Parliament, the most powerful advisors to Chrétien were a triumvirate comprising his wife Aline, his Chief of Staff Jean Pelletier and his right-hand man Eddie Goldenberg, none of whom held a seat in the House of Commons. Chrétien liked to present himself as the heir to Trudeau, but his governing style had little in common with the intense bouts of governmental activism that had characterised the Trudeau era. The Chrétien government had a cautious, managerial approach to governing, reacting to issues as they arose, and was otherwise inclined to inactivity. The most common critique of the Chrétien government, especially in its first 15 months or so from late 1993 to early 1995 was that the government had been "sleepwalking".

Immediately upon taking office in 1993, Chrétien cancelled the contract to buy the EH-101 helicopters and paid a $157.8 million termination fee to AgustaWestland. Additionally, Chrétien kept his Red Book promise of spending $6 billion on infrastructure to stimulate the economy out of recession by signing the necessary orders, and to cancel the privatization of Pearson airport. The consortium that was due to take ownership of Pearson sued for breach of contract, which led the government to settle out of court in April 1997 for $60 million in damages. Chrétien phoned President Bill Clinton of the United States in November 1993 to ask him to renegotiate aspects of NAFTA. Clinton bluntly refused, saying that it had been extremely difficult to get Congress to ratify NAFTA, and if NAFTA was renegotiated, then he would to submit the renegotiated treaty again for ratification, which was not something that he was going to do just for the sake of Chrétien. Clinton informed the Prime Minister that he either scrap NAFTA or accept it as it was, and at most he could offer were a few cosmetic concessions like writing a letter saying the United States was not interested in taking over Canada's energy and water. Chrétien chose the latter, and sought to portray Clinton's letter as a major American concession that constituted a renegotiated NAFTA, though in fact Clinton's letter was not legally binding and meant nothing.

A major issue for the first Chrétien government was the large national debt that had been inherited from the Trudeau and Mulroney eras. One of Chrétien's first acts had been to fulfill his Red Book promise to fire on February 1, 1994 the very unpopular Bank of Canada governor John Crow, who was replaced with Gordon Thiessen. Crow's policy of high interest rates in the early 1990s to achieve 0% inflation had made him almost as unpopular as the GST, indeed so unpopular that Chrétien had promised to fire him if he should become prime minister. Despite the Red Book promise, Chrétien who was fearful of the market reaction if he should sack the Bank of Canada governor sent the new finance minister Paul Martin to meet with Crow in December 1993 to tell him that he could remain as governor provided that he was willing to forgo his 0% inflation target and end the punishingly high interest rates, which Chrétien believed to be a major cause of the recession. Crow told Martin that the government should mind its own business, at which point Chrétien decided to keep his Red Book promise. Crow was one of the few people from the Mulroney era sacked by Chrétien. An important debate that took within the Chrétien government upon taking office was to what with the deputy ministers left-over from the Mulroney era, many of whom were Conservatives holding patronage positions within the bureaucracy. Many Liberals wanted a purge of all civil servants associated with the PCs, but Chrétien's aide David Zussman successfully convinced Chrétien that such a purge would be counter-productive, arguing that it would demoralize the civil service and lead to fears that Chrétien was planning on firing all the civil servants who served under Mulroney. Instead, Chrétien summoned all of the deputy ministers to inform them that there would be no purge, but that anyone who did anything that might threaten the Liberals' chance of re-election would be sacked. Because deputy ministers often knew their portfolios considerably better than the ministers in charge did, there were subtle bureaucratic forces pushing the Chrétien government to the right. In February–March 1994, detailed reports from the Canadian embassy in Kigali meant that the Canadian government was one of the best informed nations in the world about the coming Rwandan genocide. The foreign minister André Ouellet claimed that he nor anyone else in the Cabinet ever saw the reports from Rwanda.

The first budget introduced by Martin in February 1994, who had become the Finance Minister in November 1993 was described as a "mild and tame" budget focused only on the target of reducing the deficit to 3% of GNP within three years, and brought in modest cuts, mostly to defense spending. Until the terrorist attacks of September 11, 2001, the Chrétien government tended to be hostile towards defense spending with the government's white paper "Defense 94" declaring that in a post-Cold War world there would be less and less need for armed forces, which accordingly meant reduced budgets for the military. The Canadian historian Jack Granatstein in his 2004 book Who Killed the Canadian Military? accused the Chrétien government of putting the military in the uncomfortable position in the 1990s of having to do more and more UN peacekeeping missions while cutting defense spending at the same time. Granatstein accused Chrétien of having "finished off the Canadian Forces" through a policy of heavy cuts inspired by a deep personal dislike of the military and of using the military as UN peacekeepers rather preparing to fight a war. Outside of defense spending, there were few cuts in the 1994 budget. In a radio interview with Ron Collister in March 1994, Chrétien stated: "To go to our goal of 3 per cent of GNP, all the cuts been announced in the budget. There will not be a new round." According to the diplomat James Bartleman, Chrétien told him in early 1994 that major cuts to government spending outside of defense were out of the question, and instead he hoped that economy would grow enough on its own that the deficit would disappear without any cuts. Chrétien's plans in early 1994 for economic growth were to increase exports by embracing globalization and free trade with as many nations as possible, arguing that the export offensive would stimulate the economy out of the early 1990s recession. The 1994 budget was widely criticised by conservatives such as Andrew Coyne as useless in even achieving its target of reducing deficit to 3% of GNP within three years, let alone eliminating the deficit, and led to a celebrated clash between Coyne and Martin in the boardroom of the Globe and Mail newspaper. Investor reaction to the 1994 budget was very negative with many concluding that the Liberals had no serious interest in dealing with the debt problem with one economist recalling that after the 1994 budget the consensus amongst economists was that "They don’t get it. They just don’t get it". David A. Dodge, the Deputy Finance Minister complained repeatedly to Martin throughout 1994 that the 3% target was meaningless as Canada did not plan to join the European Union, that it was unlikely to achieved with the current levels of cuts outlined in the 1994 budget, and would even if achieved would do nothing to help the economy. Accordingly, Dodge advocated far more drastic cuts, policy advice that both Martin ignored until late 1994 and Chrétien until early 1995. Dodge had appointed deputy finance minister by Mulroney in 1992, and thus his views were something to the right of both Martin and Chrétien. In April 1994, interest rates in Canada started a steady rise that would continue until early 1995.

On April 6, 1994, the Rwandan genocide began. The government in Ottawa was kept well-informed about what was happening by diplomats and Canadian Forces serving as UN peacekeepers, but the genocide was not considered to be a major problem for Canada with the Chrétien government taking the view that other powers would stop the genocide. The government first insisted in April 1994 that there was only a civil war in Rwanda, and once it become clear that genocide had begun, on May 2, 1994 Ouellet, speaking for the government in the House of Commons promised humanitarian aid and expressed the hope that the Organization for African Unity would do something to stop the genocide. In 2010, the Canadian government apologized to the people of Rwanda for indifference to the genocide of 1994.

Further adding to the financial pressure on the debt situation, in May 1994, Moody's downgraded Canada's debt, citing the high debt levels and concerns about a lack of political will to deal with the deficit. A vicious circle had been created. The underwhelming 1994 budget was taken as a sign that the Liberals were not serious about eliminating the deficit, which in turn created severe doubts amongst investors holding or considering buying government of Canada bonds that they would be repaid when the bonds matured. As a result, investors cease buying government of Canada bonds, which forced the Bank of Canada to raise the interest rates in order to attract buyers of Canada bonds. The raising interest rates, besides for hindering economic activity and thus hurting the government's ability to collect taxes, raised the costs of servicing the existing national debt, which in turn created further doubts amongst investors that they would be repaid, and thus started the circle all over again. As the vicious circle caused by the lack of investor confidence and raising interest rates continued into the fall of 1994, the 3% target became increasingly unlikely to be achieved, and thus Martin became more and more influenced by Dodge's advice that something more drastic needed to be done than achieving the 3% target.

In September 1994, the Liberal Premier of Quebec Daniel Johnson was defeated by PQ led by Jacques Parizeau in the 1994 Quebec election. The victory of the PQ meant that another referendum was guaranteed, but Chrétien saw this as an opportunity to destroy the Quebec sovereignty movement once and for all. Parizeau was a "hard separatist" committed to a totally independent Quebec, and was thus regarded as a far easier opponent to defeat than "soft separatists" like René Lévesque or Lucien Bouchard, who wanted Quebec to become sovereign, but still maintain some links with Canada in the form of sovereignty association. Chrétien told the Liberal caucus that "We got them cornered", and predicated with Parizeau leading the PQ, the separatists would suffer such a defeat at the next referendum that it would be the end of Quebec separatism.

Chrétien was known to be a Sinophile and an admirer of the People's Republic of China. In November 1994, he led the first of four "Team Canada" trade missions comprising himself and 9 premiers to China (Premier Jacques Parizeau of Quebec declined to go), which had as their stated objective increasing Sino-Canadian trade. The Team Canada mission was meant to be the beginning of the export offensive that would stimulate the economy of the recession, and to achieve Chrétien's goal going back to the 1970s of a Canadian economy less dependent on trade with the United States. Under his leadership, China and Canada signed several bilateral relations agreements. The Team Canada missions attracted criticism that Chrétien seemed only concerned with economic issues, and that he rarely raised the subject of China's poor human rights record, and that on the few times that he did mention human rights in China that he went out of his way to avoid offending his hosts. Moreover, Chrétien attracted criticism for presenting the case for improved human rights in purely economic terms, arguing that a better human rights record would allow China to join the WTO and thus sell more goods to the West, and never argued the case that human rights were a positive goal in and of themselves. Chrétien argued that there was no point in criticizing China's human rights record because the Chinese never listened to such criticism, and instead were greatly annoyed about being lectured by Western leaders about their poor human rights record. Given that Canada could not really do anything to change the views of China's leaders about human rights, Chrétien contended that the best that could be done was to improve Sino-Canadian economic relations while ignoring the subject of human rights.

In January 1995, the Wall Street Journal had published an editorial written by John Fund entitled "Bankrupt Canada?" strongly critical of the Chrétien government's deficit-fighting amid a crisis atmosphere caused by the collapse of the Mexican economy in late 1994, the Canadian dollar in steep decline, and soaring interest rates, which put strong pressure on the Chrétien government to do more to reduce the deficit. The Wall Street Journal's editorial "Bankrupt Canada?" attracted much media attention in Canada and was taken as a sign that all was not well with the national finances. In particular by early 1995 the rising interest rates started to make achieving the target of reducing the deficit to 3% of GDP more and more impossible to achieve, and thus pressured the government to introduce a budget that would assure the markets that the deficit would be eliminated, not reduced in the near-future. Through not directly impacting on the Canadian economy very much, the Mexican economic meltdown in December 1994 served as a graphic and terrifying example of what happened when a nation did not manage its finances properly, and perhaps made elements of the Canadian public more open to the goal of eliminating the deficit despite the short-term pain than what they would had otherwise been. Further applying pressure on Canada was a warning from Moody's that Canada's debt rating would downgraded again if the 1995 budget did not contain a credible deficit elimination plan. Martin went on a tour of various world financial centers in early 1995 to drum up interest in buying Canadian bonds, and found that investors had no such interest, telling him that Canada had promising since the 1970s to deal with the deficit, and they wanted action, not words this time.

Chrétien was not keen on making deep cuts to government spending, but given the crisis caused by the skyrocketing interest rates had decided "reluctantly" there was no alternative. Once he had decided upon making deeper cuts than he promised, Chrétien proved to be firm supporter of the new course, and supported Martin's cuts to other departments despite the complaints of the other ministers. Chrétien's advisor Eddie Goldenberg later recalled that Chrétien was unyielding in the face of efforts by other ministers to "spare" their departments, and that Chrétien kept on saying "If I change anything, everything will unravel". In a 2011 interview, Chrétien recalled about the 1995 budget that: "There would have been a day when we would have been the Greece of today. I knew we were in a bind and we had to do something." In order to silence objections from left-wing Liberal backbenchers and Cabinet ministers, Chrétien ensured that the Program Review Committee chaired by Marcel Massé that would decide what programs to end and which to cut had a majority comprising the leftist MPs Brian Tobin, Sheila Copps, Sergio Marchi and Herb Gray, people who would not normally supporting cutting programs, and thereby underlined the seriousness of the crisis. It was only with the budget that Martin introduced on February 27, 1995 that the Chrétien government began a policy of cuts designed to eliminate the deficit in order to reassure the markets.

Through Chrétien had supported Martin in his plans for cuts, he did not allow Martin to go as far as he would have liked with cutting various social programs and to devolve spending powers to the provinces as a way of cutting federal government expenditure. As a "hard federalist", Chrétien fiercely objected to what he saw as the "soft federalist" Martin's attempts to weaken the power of the federal government under the guise of cutting the deficit. One senior Liberal later recalled about the Chrétien-Martin debate about reforming Old Age Security that:

"Martin had been told "no" by the prime minister three times and still he persisted...his insubordination was unprecedented. It got the point where Chrétien had to draw a line in the sand and say "I'm the prime minister and you're the finance minister and I'm saying no!"".

Much of the Liberal caucus was deeply unhappy with the 1995 budget, arguing that this was not what they had been elected for in 1993, only to be informed by the Prime Minister that there was no alternative. Chrétien himself expressed his unhappiness with his budget in a radio interview with Peter Gzowski in March 1995, saying about the budget: "It is not our pleasure sir, I have to tell you that. I've been around a long time. It's no pleasure at all. I'm not doctrinaire, a right-winger. I'm a Liberal, and I feel like a Liberal, and it is painful. But it is needed".

The government began a program of deep cuts to provincial transfers and other areas of government finance. During his tenure as prime minister a $42 billion deficit was eliminated, five consecutive budget surpluses were recorded (thanks in part to favorable economic times), $36 billion in debt was paid down, and taxes were cut by $100 billion (cumulatively) over five years. The 1995 budget, which was called by Peter C. Newman a "watershed document" that marked the first time in recent memory that anybody had made a serious effort to deal with the deficit, won a favorable reaction from the international markets, and a led to immediate fall in interest rates. There were, however, undeniable costs associated with this endeavour. The cuts resulted in fewer government services, most noticeably in the health care sector, as major reductions in federal funding to the provinces meant significant cuts in service delivery. Moreover, the across-the-board cuts affected the operations and achievement of the mandate of most federal departments. Many of the cuts were restored in later years of Chrétien's period in office. Also in February 1995 the Canadian Airborne Regiment was disbanded following racist hazing videos shot in 1992 coming to light. Two months later, the Defense Minister David Collenette ordered a long-running inquiry into murder and other human rights abuses committed by the Airborne Regiment while serving in Somalia in 1993 that came to be known as the Somalia Affair.

One of Chrétien's main focuses in office was preventing the separation of the province of Quebec, which was ruled by the sovereigntist Parti Québécois for nearly the Prime Minister's entire term. In September 1995, when the 1995 referendum began, Chrétien was relaxed and assured about victory as the polls showed that the federalist forces were leading by a wide margin. Relations between the federal government and chairman of the no committee, the "soft federalist" Quebec Liberal Daniel Johnson were not very good with non committee co-chairwoman Liza Frulla openly saying that Chrétien was not wanted at non campaign events, but Chrétien argued with Parizeau leading the yes committee that this did not matter. On October 8, 1995, the charismatic Lucien Bouchard replaced Parizeau as the de facto chairman of the oui committee, and at that point, the support for the yes side started to dramatically increase, aided by the complacency of the no committee who had taken victory for granted. Unlike the "hard separatist" Parizeau for whom nothing less than a totally independent Quebec republic would have sufficed, the "soft separatist" Bouchard argued for sovereignty association, which turned out to be more appealing vision of the future to many Québécois than Parizeau's vision. For Chrétien, the replacement of Parizeau with Bouchard was a sign of weakness, and it was only as October went on did he realized that Bouchard was a much more formidable opponent than was Parizeau. Several of Chrétien's ministers such as David Collenette, Sheila Copps and Brian Tobin accused Chrétien of complacency, telling the Prime Minister at a Cabinet meeting that he "needed to get off his ass or we're going to lose the country".

Furthermore, the referendum had re-opened the old feud between Chrétien and Martin with Chrétien taking the view that the "soft federalist" Martin simply could not be trusted on national unity because he was "soft on nationalists" and "too eager to grant concessions to the provinces". In the weeks leading to the referendum on October 30, 1995, the federal government was seized with fear and panic as polls showing that under the leadership of Bouchard, the oui side was going to win. Further contributing to the demoralization of the no side was the open split that emerged when the chairman of the non committee, the "soft federalist" Daniel Johnson asked for the federal government to pass a constitutional amendment recognizing Quebec as a "distinct society", a request that the "hard federalist" Chrétien flatly rejected. To assist the work of the no committee, Chrétien sent over some of his staffers from the PMO such as Dominic LeBlanc and Jean Carle to work on the non committee in Montreal. The federal Liberals from the PMO recalled that the Quebec Liberals on the non committee decidedly made them feel unwelcome and unwanted. Chrétien's Chief of Staff Jean Pelletier recalled: "Relations were not good. We were frustrated, you know...And even the federal Liberals from Quebec were not welcome by the provincial Liberals, which I think is nuts". An additional problem for the no side occurred when the Gaullist president of France, Jacques Chirac, stated in a TV interview that France would not only recognize an independent Quebec at once, but also use its influence within the European Union to have the other EU nations recognize Quebec as well, a statement that boosted support for the yes side. Such was Chrétien's alarm at Chirac's remark that the prime minister—who normally fiercely resented anything that smacked of American interference in Canadian internal affairs in the slightest—lobbied U.S. President Bill Clinton behind the scenes for an American statement in favor of a united Canada. Chrétien's efforts paid off, and Clinton not came out very strongly for the federalist side in a TV interview, but also stated that an independent Quebec would not automatically became a member of NAFTA as the yes side was claiming.

With the federalist forces in open disarray and the polls showing that the yes side was going to win, Fisheries Minister Brian Tobin suggested organizing a gigantic "unity rally" in Montreal. Most of the Cabinet was opposed to Tobin's idea, but Chrétien decided to support the rally, telling Tobin at the Cabinet meeting "Brian-Go!" Chrétien's chief of staff Jean Pelletier later recalled that "We muscled in" on leading the no forces as Johnson, the nominal leader of the no committee was considered to be an inept leader who would lose the referendum on his own. Facing defeat, Chrétien did an U-turn on the question of a "distinct society", saying in a speech on October 24 in Verdun that the federal government was now open to the idea of recognizing Quebec as a "distinct society" in the constitution. In a speech before the Liberal caucus on October 25, Chrétien acknowledged openly the possibility of defeat, and lashed out at the Quebec media whom he accused of pushing "a big pile of shit" that was allowing the yes side to win people over, and suggested that he might resign if the oui side won. On October 26, 1995, Montreal radio station disk jockey Pierre Brassard telephoned Queen Elizabeth II pretending to be Chrétien; he discussed the pending referendum, but also rambled about odd subjects, such as what the Queen would be wearing for Halloween and placing her effigy on Canadian Tire money. The Queen later said to Chrétien: "I didn't think you sounded quite like yourself, but I thought, given all the duress you were under, you might have been drunk." The result of Tobin's efforts was the Unity Rally of October 27, 1995, when 100,000 people showed up. On the night of the referendum, the prospect of a victory for the yes side was considered to be so realistic that Defense Minister David Collenette ordered the military to begin contingency plans to defend federal property in Quebec from a separatist take-over should the yes side prevail. On October 30, 1995, the federalist no side won by the narrowest of margins. Chrétien blamed the narrow victory on the Quebec Liberals under Johnson, whom he claimed had betrayed him, and argued the federalists would had done much better if only he had intervened in the referendum earlier, and presented the no case in terms of Trudeau-style "hard federalism" instead of the "soft federalist" no case presented by Johnson, which depicted the benefits of Confederation in purely economic terms, and had a strongly nationalist, albeit federalist tone of language.

In the aftermath of the narrow victory in the referendum, Chrétien started in late 1995 a new policy of "tough love", also known as "Plan B", where the federal government sought to discredit Quebec separatism by making it clear to the people of Quebec how difficult it would be leave Canada. Through Chrétien had promised to enshrine recognition of Quebec as a "distinct society" in the constitution in order to win the referendum, this promise was quickly forgotten in the aftermath of victory with Chrétien arguing that the very vocal opposition of Ontario Premier Mike Harris to amending the constitution to recognize Quebec as a "distinct society" made that impossible. Instead Chrétien had Parliament pass a resolution recognizing Quebec as a "distinct society", which had no constitutional force and was only a symbolic step. Through Harris's promise to veto any sort of "distinct society" clause in the constitution made fulfilling Chrétien's commitment to put such a clause into the constitution impossible, Chrétien did not seem to champion the idea of a "distinct society" clause with any great conviction.

On November 5, 1995, Chrétien and his wife escaped injury when André Dallaire, armed with a knife, broke in the Prime Minister's official residence at 24 Sussex Drive. Aline Chrétien shut and locked the bedroom door until security came, while Chrétien held a stone Inuit carving in readiness. In November 1995, the long-running Airbus affair hit the headlines. On November 18, 1995, a leaked letter appeared in the Financial Post where the Justice Ministry headed by Allan Rock asked Swiss authorities to investigate certain bank accounts alleged to be held by the former Prime Minister Brian Mulroney and former Newfoundland Premier Frank Moores where the proceeds of an alleged kickback scheme relating to the purchase of Airbus jets by the Mulroney government in 1988 had been stored. Mulroney sued for libel on November 23, 1995, claiming that the PMO had the letter leaked in order to distract attention from the near-defeat in the Quebec referendum, and asked for $50 million in damages.

In early 1996, the federal government launched an advertising program to increase the presence of Canada in Quebec, a policy that Chrétien believed would avoid a repeat of the near-defeat of 1995, and was to lead eventually to the Sponsorship scandal. As part of his "Plan B" for combatting Quebec separatism, in a speech in January 1996, Chrétien endorsed the idea of partitioning Quebec in the event of a yes vote in another referendum, stating all of the regions of Quebec that voted no would remain part of Canada, regardless of what the Quebec separatists thought. On February 15, 1996, Chrétien was confronted by a protester, Bill Clennett, during a walkabout in Hull, Quebec. The prime minister responded with a choke-hold. The press referred to it as the "Shawinigan Handshake" (from the name of his home town). In March 1996, when the Chrétien government presented its third budget, the backbencher Liberal M.P. John Nunziata voted against the budget under the grounds it failed to repeal the GST as the Liberals had promised in 1993 and singled out for criticism his former Rat Pack colleague Sheila Copps who had promised during the 1993 election to resign within a year if the GST was not repealed. Chrétien's response was to expel Nunziata from the Liberal caucus. However, the expulsion of Nunziata drew attention to the fact that Copps was still in office despite her promise to resign within a year if the GST was not repealed. Chrétien first stated that Copps would stay in Parliament despite her promise of 1993, but then intense public pressure (together with a poll showing Copps would win a by-election) forced Copps to resign from the Parliament. After resigning, Copps then contested the resulting by-election, where she won and then went straight back into the Cabinet. To help defuse anger over the GST issue, in the spring of 1996 the Chrétien government moved swiftly to achieve its Red Book promise of harmonizing the GST with provincial sales taxes by signing an accord with three of the four Atlantic provinces creating a Harmonized Sales Tax; the other provinces were not interested in the federal offer to harmonize their sales taxes.

In the spring of 1996, the Somalia inquiry had discovered evidence of a widespread cover-up of the murder of a Somali by the Airborne Regiment in 1993. Through the events that the inquiry was examining took place in the last days of the Mulroney government, many of the civil servants and officers involved were still serving in 1996. At time of the killing of the Somali teenager Shidane Arone in March 1993 the long-serving Deputy Defense minister Robert Fowler issued a memo saying that nothing must come to light that would embarrass the Defense Minister Kim Campbell. Fowler went on to serve as a senior diplomat under Chrétien. Chrétien made little secret of his annoyance with the Somalia inquiry, stating that inquiry was treating civil servants "as if they were almost criminals" and that the inquiry was taking too long as "Even the Watergate was settled in six or seven weeks in the United States" (the Watergate inquiry actually took 20 weeks). Later in 1996, Chrétien delivered a speech before a group of high school students, where he claimed to have regularly met with a homeless man in an Ottawa park to seek his advice, which he often took. At that point, journalists sought to find Chrétien's homeless advisor in the park, and could find no trace of any such person existing, which led Chrétien to admit that he not met with anybody homeless since becoming Prime Minister in 1993.

After the 1995 referendum very narrowly defeated a proposal on Quebec sovereignty, Chrétien started to champion what eventually become the Clarity Act as part of his "Plan B". In August 1996, the lawyer Guy Bertrand won a ruling in a Quebec court declaring that the sovereignty question was not just a political matter between Quebec City and Ottawa, but also a legal matter which was subjected to the rulings of the courts. Following that ruling, Chrétien decided that here was a means of defeating the Quebec sovereignty movement, and in September 1996, ordered the Justice Minister Allan Rock to take this question of the precise legality of Quebec separating to the Supreme Court. Stéphane Dion advised Chrétien that if the federal government won the reference to the Supreme Court as expected, that the government should then draft a bill that stated what were the precise rules for Quebec to leave, telling the Prime Minister if the people of Quebec could be shown how difficult it would be to leave, then support for separatism would fall. Along the same lines, Dion started to send much publicised open letters to Quebec ministers questioning the assumptions behind the separatist case. The new policy of "Plan B" towards Quebec created much tension within the Cabinet with the "soft federalist" fraction led by Martin opposing the "Plan B" policy, especially the Clarity Act, and instead preferred a new Meech Lake-like constitutional deal while the "hard federalist" fraction led by Chrétien championed the new policy of confronting the Bouchard government and were against any concessions on the constitution. The "hard federalist" Chrétien fraction took to disparagingly referring to the "soft federalist" Martin fraction as "the appeasers".

In October 1996, the long-running Somalia inquiry claimed a prominent victim when General Jean Boyle was forced to resign as Chief of the Defense Staff allowing allegations that he attempted to stymie the work of the inquiry and he had committed perjury when he testified before the inquiry about his role in the alleged Somalia cover-up of 1993. That same month, David Collenette, whose position was widely seen as untenable after Boyle's resignation given that he had personally selected Boyle, resigned as Defense Minister, ostensibly because of a minor violation of the ethics rules, to be replaced with Doug Young. Young frankly admitted in an interview in late 1996 he "certainly wouldn't want to be in an election campaign with the inquiry still going on". In early 1997, Young ordered the inquiry to be shut down despite the complaints from the commissioners that their work was far from done. This marked the effective end of the Somalia Affair. Speaking about the shut-down of the inquiry, one of the commissioner Peter Desbarats said: "The fact that Chrétien was willing to tamper with something like an independent inquiry for the sake of what appeared to be minuscule political advantage, I just thought, Wow, if he'll do that, he'll do anything." Desbarats stated that he once been a fan of Chrétien, but the shut-down of the Somalia inquiry "changed the way I look at him totally".

Chrétien called an early election in the spring of 1997, hoping to take advantage of his position in the public opinion polls and the continued division of the conservative vote between the PC Party and the upstart Reform Party of Canada. Despite slipping poll numbers, he advised the Governor General to call an election in 1997, a year ahead of schedule. Many of his own MPs criticized him for this move, especially in light of the devastating Red River Flood, which led to charges of insensitivity. The Liberal MP John Godfrey tried hard to interest Chrétien in an ambitious plan to eliminate urban poverty in Canada as a platform to run on in the election, which was vetoed by Eddie Goldenberg and John Rae of the PMO, who convinced Chrétien that it was better to stick with an "incrementalist" course of small changes than risk any grand project. The Progressive Conservatives had a popular new leader in Jean Charest and the New Democrats' Alexa McDonough led her party to a breakthrough in Atlantic Canada, where the Liberals had won all but one seat in 1993. In 1997, the Liberals lost all but a handful of seats in Atlantic Canada and Western Canada, but managed to retain a bare majority government due to their continued dominance of Ontario.

Second mandate (1997–2000)

Chrétien was involved in a controversy again in November 1997, when the Asia-Pacific Economic Cooperation summit was held on the University of British Columbia campus in Vancouver. The APEC summit was a meeting of many Asian and Pacific countries, and students on UBC's campus protested the meeting of some of these leaders because of their poor human rights practices. One of the leaders most criticized was then Indonesian President Suharto for killing at least 500, 000 people when he came to power in a coup on 30 September 1965 and for waging a near-genocidal campaign in East Timor. Demonstrators tore down a barrier and were pepper-sprayed by the RCMP. Other peaceful demonstrators were subsequently pepper-sprayed as well. There was debate over whether the action was necessary. It was alleged that the initiative for the RCMP assault on the demonstrators was because of complaints from the President Suharto of Indonesia and President Jiang Zemin of China to the Canadian government about the demonstrators. The Indonesian and Chinese leaders both came from countries where demonstrators were routinely shot down by the government, and both found the demonstrators in Canada to be deeply upsetting, which led to pressure especially from Suharto on the Canadian government to silence the demonstrators. Suharto had made clear that his coming to Canada was dependent upon his "dignity" not being insulted by any demonstrators. In response to Suharto's concerns about his "dignity" being called into question by protests, he had been promised by the Canadian government that no protesters would be allowed to get close and in early August 1997 the RMCP was informed by the PMO that the Prime Minister did not wish for any "distractions" at the up-coming conference. During the protests, a First Nations leader claimed to have overheard Chrétien giving orders to the RCMP to remove the signs protesting against the human rights violations in China and Indonesia at once before Suharto or Jiang had a chance to see them.

Chrétien responded to the media's questions about the incident at a press conference. He was asked about the pepper-spraying by a Vancouver-based comedic reporter known as "Nardwuar the Human Serviette", a frequent contributor to Canada's MuchMusic network, known for his high-pitched voice and odd attire, who told Chrétien that there was a song released by a punk rock band called "The Nomads" (a fictitious band Nardwuar had made up) called "The Suharto Stomp". Nardwuar then asked Chrétien "Do you think, if you were say 40 years younger, that you too would be writing punk songs about Suharto and protesting against APEC?" Chrétien replied that he himself had protested as a student, and that in a democracy, protests were to be expected. Nardwuar followed up by telling the Prime Minister that "Some of the protesters were maced." Chrétien asked, "What do you mean by that?" Nardwuar then clarified, "Mace? Pepper spray?" Chrétien then stated abruptly, "I don't know, these techniques did not exist in those days", which received big laughs from everyone in the room. Nardwuar simply smiled at Chrétien's joke, and the Prime Minister concluded his answer by adding "For me, pepper, I put it on my plate", with a smile while pantomiming shaking pepper onto a plate. This line also received laughter. However, allegations soon arose that someone in the Prime Minister's Office or Chrétien himself gave the go-ahead for the pepper-spraying of protesters. Chrétien denied any involvement, and it has never been proven.

In January 1998, Chrétien's government announced that the CH-113 helicopters would be replaced by a scaled-down search-and-rescue variant of the EH101, carrying the designation CH-149 Cormorant. Unlike the Petrel/Chimo contract which Chrétien had cancelled in 1993, these 15 aircraft were to be built entirely in Europe with no Canadian participation or industrial incentives. The first two aircraft arrived in Canada in September 2001 and entered service the following year. His Maritime Helicopter Project was supposed to find a low-cost replacement aircraft. The candidates were the Sikorsky S-92, the NHIndustries NH90 and the EH-101, although critics accused the government of designing the project so as to prevent AgustaWestland from winning the contract. A winner, the Sikorsky CH-148 Cyclone, would not be announced until after Chrétien retired.

In February 1998, for the first time since 1969 a balanced budget was presented by the government. Shortly afterwards, the Chrétien government fulfilled its Red Book promise of 1993 by introducing the National Child Benefit program for the children of low-income parents. Through Chrétien and Martin still disliked each other on the account of the bruising 1990 leadership race, a cordial working relationship was established indirectly with Chrétien's right-hand man Eddie Goldenberg regularly meeting with Martin's aide Terrie O'Leary to work out mutually acceptable policies for the government to pursue. In March 1998, Chrétien won the leadership review required after every election by 90%. According to one of Chrétien's staffers at the PMO, Terry Mercer that: "It was not long after the 98 convention that we began to see the first evidence that the Martin camp had no intention of letting nature take its course, and this began to cause problems throughout the system". In April 1998, the government attracted much criticism when the Health Minister Allan Rock waged a successful battle to limit the number of Canadians stricken with Hepatitis C through government negligence who could collect compensation for their suffering. Chrétien's biographer Lawrence Martin wrote that the attitude of Chrétien to the Hepatitis C victims was not unlike the "heartless" attitude that he during his time in the opposition he accused Mulroney of holding. Rock had wanted to compensate all of the hepatitis C victims, but was overruled by the prime minister, who told him the government would compensate only those afflicted between 1986–1990. The Liberal backbencher Carolyn Bennett was later to claim in an interview that it was unconscionable on the part of Chrétien to refuse to compensate all of the hepatitis C victims, and then to spend $57 million in legal fees in a successful effort to stop hepatitis C activists from getting a ruling from the courts to compensate all victims.

In August 1998, the Supreme Court of Canada in the Reference re Secession of Quebec ruled in favor of the federal government's claim that a unilateral declaration of independence on the part of Quebec was illegal, that to leave Confederation would require Quebec to negotiate with the federal government, and that Quebec could only leave after achieving a settlement with Ottawa granting independence. This ruling created the legal background to the bill that became the Clarity Act.

In October 1998, the APEC controversy came to the fore again when the New Democrat M.P Dick Proctor claimed during a flight to have overheard the Solicitor General Andy Scott tell his travelling companion Fred Toole that the inquiry into the APEC protests was going to be a white-wash, and that it had already decided before the inquiry had even began that Chrétien was going to be cleared of wrongdoing. Chrétien denied Proctor's account of what he claimed to have heard Scott say, and initially Chrétien stated that Scott would stay on as Solicitor General. But as the controversy increased, Scott suddenly resigned, to be replaced with Lawrence MacAulay.

In late 1998 and early 1999, tensions between the Chrétien and Martin camps started to come out in the open with backbenchers loyal to the two men leaking unflattering stories to the press about their rival patrons. Chrétien rarely changed the composition of the Cabinet, and so as a result, there had emerged by the late 1990s a group of deeply disgruntled Liberal backbenchers, who believed themselves to be Cabinet-worthy MPs, and were extremely frustrated that the Prime Minister would not elevate them to the Cabinet. This group become Martin's strongest supporters as they believed that only by deposing Chrétien could they achieve the promotion to the Cabinet that they so desperately desired. A major advantage enjoyed by the Martin fraction was that in a process starting in 1995 they were able to take control of much of the Liberal Party apparatus reaching a point about 1999 where Martin supporters had an almost undisputed control of the Liberal party as opposed to the government. When asked in an interview about why Chrétien allowed this to happen, Sergio Marchi said: "He just became complacent". Chrétien tended to focus his efforts on controlling the government via the PMO with one of his aides at the PMO Terry Mercer making the revealing remark during a meeting of the Liberal national executive in 1998 that: "I don't work for the party, I work for Jean Chrétien". This tendency had become especially acute by the late 1990s when Chrétien was widely seen to have lost touch with the Liberal Party apparatus and caucus, and was described by Marchi as living in a "bubble" comprising himself and his people at the PMO with relations with those outside of the "bubble" growing more cold and distant as time went by. Chrétien was well aware of the Martin group and its ambitions, but as he believed that Martin had trouble making difficult decisions that the danger was minimal because "Mr. Dithers" Martin would never make up his mind. An additional problem for Martin in challenging Chrétien was that beyond the differences between Chrétien's "hard federalist" approach to Quebec and Martin's "soft federalist" approach, there were no major policy differences between him and the Prime Minister. Since the Clarity Act and Chrétien's entire "Plan B" approach to Quebec were very popular in English Canada, challenging Chrétien on that issue was considered to be unwise, and with no other issue to take a stand on, it was hard for Martin to make a case that Chrétien needed to go. Martin was not very likely to rally much support in English Canada on the thesis that Chrétien needed to be deposed because he was being too tough with the separatist government in Quebec City. Through Martin did not publicly oppose the Clarity Act, he also initially refused to voice support for it in public and several of his aides and Martinista MPs leaked the news to the media that the Finance Minister did not believe that the Clarity Act was a wise piece of legislation.

In February 1999, the Social Union Framework Agreement (SUFA) was signed between Ottawa and the 9 of the 10 provinces (Premier Lucien Bouchard of Quebec refused to sign the agreement). The SUFA had promoted by the Inter-government affairs minister Stéphane Dion as a way of promoting a new era of federal-provincial harmony, but Chrétien himself was unenthusiastic, taking the view that the SUFA had given too much to the provinces and Chrétien had only signed the SUFA as a way of gaining the support of the 9 English provinces in his battles against the Bouchard government in Quebec. The SUFA turned out to be largely meaningless as the provinces and the federal government spent money on various social programs with little effort at the sort of co-operation that the SUFA had envisioned.

In the spring of 1999, Chrétien supported Canada's involvement in NATO's bombing campaign of Yugoslavia over the issue of Kosovo, even through the operation was unsanctioned by the UN Security Council thanks to a Russian veto of an Anglo-American resolution asking for the Security Council's approval of the NATO bombing. The idea of bombing Yugoslavia caused some discomfort within the ranks of the Liberal party as the NATO campaign effectively meant supporting Kosovo separatists against a government determined to prevent Kosovo's secession from Yugoslavia. Chrétien was personally uncomfortable with the idea of bombing Yugoslavia, but supported the war because he valued good relations with the United States far more than he cared about Yugoslavia. Chrétien's foreign minister at the time, Lloyd Axworthy justified Canada's involvement in NATO bombing of Yugoslavia under the grounds that allegations of massacres against ethnic Albanians in Kosovo made the use of force legitimate on humanitarian grounds, even without the approval of the UN Security Council. Likewise, Chrétien was later to tell Lawrence Martin that it was far better to intervene in the internal affairs of Yugoslavia to stop human rights violations in the Kosovo region by Serbian forces than to do nothing.

In June 1999, Peter Donolo, Chrétien's well liked communications director, retired to be replaced with Françoise Ducros. Donolo was not part of Chrétien's inner circle, which comprised Eddie Goldenberg, Jean Pelletier and his wife Aline, but he often exercised a certain stabilizing influence on Chrétien, and was able to maintain good relations with the Martin camp. Donolo did not approve of some of Chrétien's other advisors like Warren Kinsella, whom Donolo accused of being overtly aggressive and of seeing enemies everywhere. Kinsella for his part saw Martin and his followers as almost much an enemy as the opposition parties, and favored working against as opposed to working with the Martin fraction. Reflecting the changed media team of Ducros and Kinsella, after a minor cabinet reshuffle in the summer of 1999, a story was leaked from the PMO that the reshuffle was a "shot across the bow" that was intended to send the message that Chrétien would be seeking a third term, a message that Donolo felt was unwise as it was bound to provoke a response from the Martin camp.

In August 1999, the Anglo-Canadian media magnate Conrad Black was due to receive a British peerage. Two days before Black was to receive his title, Chrétien advised Elizabeth II not to accord Black a title of nobility, citing the 1917 Nickle Resolution, where the Canadian House of Commons asked King George V not to grant any titles of nobility or knighthoods to Canadians, and thereby ensured that Black was not raised to the peerage as he was expecting to be. However, the Nickle resolution like all parliamentary resolutions was only symbolic, was in no way legally binding on Chrétien and several Canadians had been either knighted or raised to the House of Lords after 1917. Chrétien's biographer Lawrence Martin wrote that Chrétien's argument that he had no choice, but to prevent Black from given a title because of the Nickle resolution was "shaky". Many saw Chrétien's blocking Black from a peerage not as a case of the prime minister merely enforcing the Nickle resolution as Chrétien claimed, but rather as an act of revenge for the often critical coverage that Chrétien received from The National Post newspaper, which was owned by Black at that time. The columnist Mark Steyn wrote in The National Post that Chrétien blocking Black from created a nobleman was "an exquisite embodiment of psychologically crippled small-mindedness". By contrast, Chrétien's close associate Eddie Goldenberg was later to claim that Chrétien cared deeply about the Nickle resolution, and would have had blocked Black from being raised to the peerage even if The National Post were more friendly to him. Black-who felt humiliated by this episode-sued Chrétien for what he alleged to be an abuse of power, leading to the legal case of Black v. Chrétien. In 2001, the court ruled in favor of Chrétien, stating it was the prime minister's prerogative to advise the Queen not to raise Canadians to the British peerage if he felt so inclined, and thereforth this was not an abuse of power as Black had claimed.

In 1999, Chrétien decided to follow up his victory in Reference re Secession of Quebec in 1998 by passing the Clarity Act. Jean Pelletier recalled in an interview about the genesis of the Clarity Act:

"The Clarity Act was Jean Chrétien's idea. I don't want to minimize the role of Dion, but in the beginning, he was not in favour of it. In fact, when the Act was brought to cabinet, there was only one vote in favour, and it was Jean Chrétien. Everyone else was against or unsure, including Dion. We tried twice to get Jean Charest to carry the ball for the Act. We met him twice, Dion and me, but he refused. There was one meeting in the spring and another in the autumn of 1999. The package was ready, the law was printed and it was ready to be introduced."

In December 1999 the Chrétien government tabled the Clarity Act, which passed Parliament in June 2000. The Clarity Act, which was Chrétien's response to his narrow victory in the 1995 referendum requires that no Canadian Government may acknowledge any province's declaration of independence unless a "clear majority" supports a "clear question" about sovereignty in a referendum, as defined by the Parliament of Canada, and a constitutional amendment is passed. The size of a "clear majority" is not specified in the Act. After the Clarity Act had passed by the House of Commons in February 2000, a poll showed that the federalist forces enjoyed a 15% lead in the polls on the question if Quebec should become independent, which Chrétien argued meant that the sovereignty option was now effectively off the table as Bouchard had always said he would only call another referendum if he could obtain "winning conditions", which he plainly did not possess at the moment.

Relations between Chrétien and Martin were frequently strained, and Martin was reportedly angling to replace Chrétien as early as 1997. Martin had long hoped that Chrétien would just retire at the end of his second term, thereby allowing him to win the Liberal leadership, and were greatly disappointed in January 2000 when Chrétien's communications director Françoise Ducros had fired "a shot across the bow" by confirming what had been strongly hinted at since the summer of 1999 in an announcement to the caucus that Chrétien would seek a third term. Martin met with his supporters in what appeared to be a half-hearted attempt at a coup to discuss how best to replace Chrétien at the Regal Constellation Hotel near Toronto's Pearson airport in March 2000 during a Liberal convention, which Chrétien later cited as the 'breaking point' of their relationship. The secret meeting at the Constellation Hotel was called in response to Ducros's announcement with the aim of finding the best way of removing Chrétien, through Martin and his advisors were not quite sure about how best to do this, or if they even wanted to depose Chrétien at this point in time.

Chrétien called another early election in the fall of 2000, again hoping to take advantage of the split in the Canadian right and catch the newly formed Canadian Alliance and its neophyte leader Stockwell Day off guard. At the funeral of Trudeau in September 2000, President of Cuba Fidel Castro happened to meet with Day. Later that same day, Chrétien met with Castro, where Chrétien asked Castro about his assessment of Day and if he should call an early election or not. Castro advised Chrétien to dissolve Parliament early as he considered Day to be a lightweight, and as Castro was a leader whom Chrétien respected, his advice was an important reason for the election. Finance Minister Paul Martin released a 'mini-budget' just before the election call that included significant tax cuts, a move aimed at undermining the Alliance position going into the campaign. Chrétien formed a "war room" comprising his communications director Françoise Ducros, Warren Kinsella, Duncan Fulton and Kevin Bosch to gather material to attack Day as some sort of fascist who would plunge Canada into the Dark Ages, and to put forward the thesis to the Canadian people that Day had a "hidden agenda", which was so horrifying that Day dared not to reveal it to the people of Canada until after he won power. In the first weeks of the 2000 election, the Canadian Alliance gained in the polls while voters expressed a certain coolness to Chrétien, whom most voters complained had overstayed his time in office and had no agenda beyond staying in power for the sake of staying in power. The fact that the Red Book of 2000 consisted almost entirely of recycled promises from the Red Books of 1993 and 1997 and various banal statements further reinforced the impression of a Prime Minister with no plans or vision for Canada and whose only agenda was to hang onto power as long as possible. For a moment in October 2000 it appeared possible that the Alliance might win the election as the poll numbers continued in its favor. However, the Liberal claim that Day planned to dismantle the health care system to replace it with a "two-tier" health care system together with a number of gaffes on Day's part started to turn opinion decisively against the Canadian Alliance, despite the fact that most voters were growing tired of Chrétien. A CBC report on November 16, 2000 stated: "Transport Minister David Collenette is said to have admitted at a strategy meeting that Chrétien is a problem and voters are saying they want Finance Minister Paul Martin to lead the party". However, the Liberal attacks against Day as a right-wing fanatic affected the voters more than did wariness with Chrétien. The climax of the Liberal effort to paint the Canadian Alliance as a gang of far-right wing extremists came on November 16, 2000 when the Liberal MP Elinor Caplan gave a much publicised speech, in she declared about the rank and file of the Canadian Alliance: "Their supporters are Holocaust deniers, prominent bigots and racists". Leading a certain degree of creditability to the Grit claim that the Alliance was a party of racists was a speech on November 18, 2000 by the Alliance candidate Betty Granger in Winnipeg where she ominously warned that Canada was faced with the threat of an “Asian invasion”, by which Granger meant that Canada was accepting too many Asian immigrants for its own good. Through Day promptly apologised, forced Granger to suspend her candidacy and insisted that the Alliance was opposed to racism, the damage had been done, and the Liberals made extensive use of the “Asian invasion” speech to suggest to Canadians, especially Asian-Canadians that the Alliance was a haven of white supremacists’. On November 22, 2000, Chrétien gave a speech in New Brunswick which in which he implied that people from Alberta were not quite normal, saying: "I like to do politics with people from the East. Joe Clark and Stockwell Day are from Alberta. They are a different type".

In November 2000 during the election, the Grand-Mere Affair, also known as the Shawinigate scandal broke. After initial denials, Chrétien acknowledged having lobbied the Business Development Bank of Canada, owned by the Government of Canada, to grant a $2 million loan to Yvon Duhaime. Duhaime was a friend and constituent to whom the Prime Minister stated that he had sold his interest in the Grand-Mère Inn, a local Shawinigan-area hotel and golf resort, eventually providing evidence of the sale—a contract written on a cocktail napkin. Duhaime was a local businessman with an unsavoury reputation and a criminal record, who received a loan from the Business Development Bank that he was ineligible to collect on the account of his criminal record (Duhaime did not mention his record when applying for the loan). The Business Development Bank had turned down the initial loan application, but later approved a $615,000 loan following further lobbying by Chrétien. When the Business Development Bank refused to extend the loan in August 1999 under the grounds that Duhaime was a businessman with a bad reputation with a history for losing money on past business ventures and that he was already behind on his current payments, the president of the bank François Beaudoin was fired by Chrétien in September 1999, which led to a wrongful dismissal suite that Beaudoin was to win in 2004. It was revealed that Chrétien had never been paid for his share in the sale of the adjoining golf course, and criminal charges were laid against Duhaime. The Prime Minister's ethics counselor Howard Wilson, who was appointed by and reported to the Prime Minister, determined that Prime Minister Chrétien had not violated any conflict-of-interest rules, noting that there were no clear rules on lobbying Crown corporations for making loans to business ventures that the Prime Minister may or may not had a stake in. There was no comment on ethics of Chrétien's lobbying by the ethics counselor Wilson. The revelation of the Grand-Mere affair did not affect the outcome of the 2000 election. Chrétien and his circle believed that the breaking of the Grand-Mere story during the election was the work of the Martin fraction.

Day turned in a generally weak performance during the campaign that did little to allay media concerns about his socially-conservative views. A particular campaign stunt that attracted much attention occurred, when Warren Kinsella, often known as Chrétien's "attack dog", went on the Canada A.M TV show with a stuffed Barney dinosaur doll to mock's Day's purported belief that dinosaurs and humans once co-existed, saying that: "I just want to remain Mr. Day that The Flintstones was not a documentary. And this is the only dinosaur that recently co-existed with humans" while holding up the Barney doll. After the "Barney moment", Kinsella's debating partner, Tim Powers of the Alliance is said to have remarked to Kinsella: "We're fucked. We are well and truly fucked". Kinsella had gotten the idea for the Barney stunt after a meeting with Chrétien's close associate Jean Carle to discuss a documentary about Day where several people claimed that Day had given a speech in 1997 where he was alleged to have stated his belief that humans and dinosaurs had co-existed. According to Kinsella, Chrétien phoned him to congratulate him on the Barney stunt, and found it so funny that he asked Kinsella to repeat his retelling of the "Barney moment" several times. The Barney stunt was part of a gambit by Kinsella to win NDP voters for the Liberals as Kinsella believed if New Democratic voters could be convinced that Day was a "crazy" Protestant fundamentalist fanatic, then they would vote for the Liberals as the best party to stop Day rather risk Vote splitting on the left. The New Democrats and Bloc Québécois also ran lacklustre campaigns, while the Progressive Conservatives, led by former Prime Minister Joe Clark, struggled to retain official party status. The relentless Grit attacks meant to demonize the Alliance as a gang of crazed right-wingers with a "hidden agenda" had the effect of causing many New Democratic voters to support the Liberals as the best party to stop the Alliance. The Liberals secured a strong majority mandate in the 2000 election, winning nearly as many seats as they had in 1993, largely thanks to significant gains in Quebec and in Atlantic Canada. Without Jean Charest as leader, the Tories who had done well in winning the popular vote in Quebec in 1997 fared poorly in 2000, and most of their voters defected over to the Liberals. Many voters in English Canada expressed the view that they had voted Liberal less of affection for the "natural governing party" than because the alternative in the form of Day was so much more worse. The fact that Martin attracted more enthusiasm from the public on the campaign trail than did Chrétien was much noticed within the Liberal Party.

Third mandate (2000–2003)

Reflecting the non-activist nature of his government, Chrétien's major policy initiative in the first half of 2001 was increasing the pay of MPs by 20%. As a result, the pay of MPs went from $109,000 per year to $131,000 per year while Chrétien's own salary went from $184,000 per year to $262,000 per year. Chrétien was due to face a leadership review in February 2002, but the Liberal national executive, which was controlled by partisans of Paul Martin, agreed to Chrétien's request in early January 2001 that the leadership review be pushed back to February 2003. In agreeing to this request, Martin believed that this was the quid pro quo for allowing Chrétien a decent interval to retire with dignity sometime in 2002, an interpretation that Chrétien did not hold. Chrétien saw the extra year as merely giving him more time to win the leadership review.

In what Chrétien saw as a personal triumph, on January 11, 2001, Quebec Premier Lucien Bouchard resigned, saying he did not foresee the necessary "winning conditions" for another referendum emerging at that time. Chrétien argued that the Clarity Act had prevented the "winning conditions" from appearing, and maintained that if the charismatic Bouchard could not create the necessary "winning conditions", then his more dour successor Bernard Landry would certainly not. Chrétien took the view that effectively the Quebec sovereignty movement had been neutered by the Clarity Act, and that it did not matter if the PQ remained in office or not because they could not win a referendum. By contrast, the Martinista fraction of the Liberals argued that the decline of the PQ was due more to an improving economy—which they credited Paul Martin for—rather than with the Clarity Act and "Plan B", which they saw as pointlessly aggressive towards Quebec.

In early 2001, politics were dominated by questions about the Grand-Mere Affair. Both the Canadian Alliance and the Progressive Conservatives frequently charged that Chrétien had broken the law in regards to his lobbying for Business Development Bank for loans to the Auberge Grand-Mère inn. Questions were especially centered around the firing of Business Development Bank president François Beaudoin, and the involvement of Jean Carle, formerly of the PMO, in sacking Beaudoin. Carle served as Chrétien's chief of operations between 1993 and 1998 before leaving to take up an executive post at the Business Development Bank, and was described by Maclean's in 1998 as being so close to the Prime Minister as to be almost a member of the Chrétien family. Carle and Chrétien were so close that in the 1980s, Chrétien had allowed Carle to live rent-free in his basement at his Ottawa house. Carle was widely seen within the Liberal ranks as Chrétien's "surrogate son". Patrick Lavelle, the chairman of the Business Development Bank, tried to block Carle's appointment on the grounds that he was unsuitable for the post, but after a meeting with Carle's patron Chrétien, felt he had "no choice" but to accept Carle. Chrétien claimed that Carle was not involved in any way with the loans to the Grand-Mere Inn, only to be countered by Joe Clark, who produced a leaked document showing that he was. On February 19, 2001, the RMCP announced that there they did not find sufficient evidence to lay criminal charges against anyone in regards to the Grand-Mere Affair, and Chrétien accused Clark of waging a "witch hunt" against the Liberals. On March 2, 2001, the federal ethics counselor Howard Wilson again cleared Chrétien of wrongdoing in the Grand-Mere Affair. The opposition parties charged that because Wilson was accountable only to the Prime Minister, not Parliament, that he was a puppet of Chrétien's who would never rule against his boss. Recalling that the Red Book of 1993 had promised that the Liberals would appoint an ethics counselor responsible to Parliament, the Canadian Alliance tabled a motion that was a verbatim copy of the Red Book promise, which Chrétien then ordered the Liberals to vote against. One Grit backbencher complained to the media that Chrétien had made the entire caucus "feel like goddamned hypocrites". On April 5, 2001, The National Post received documents purportedly from an anonymous source within the Business Development Bank, dealing with Chrétien's interest in the Auberge Grand-Mère inn, one of which contained a footnote indicating that Chrétien was still owed $23,040 by Duhaime for his share in the Auberge Grand-Mère at the time in 1997 when he was lobbying the Business Development Bank to make a loan to the Auberge Grand-Mère, in which case, presuming the documents are genuine, Chrétien would had broken the law on conflict-of-interest. Chrétien maintained and still maintains that the documents are forgeries done by persons unknown, designed to discredit him. Since 2001, the RCMP has been investigating the alleged forgery, through no suspect has yet emerged, and some such as the journalist Colby Cosh have expressed doubts about Chrétien's forgery claim. The complex issues concerning conflict-of-interest laws, ownership of the Grand-Mere Inn and its golf course, and the firing of Beaudoin did not excite much interest on the part of the Canadian public.

In the spring of 2001, Chrétien, through making clear that he intended to serve out his entire term, announced that he had nothing against cabinet ministers fund-raising for a future leadership battle when he finally did retire. Chrétien's decision sparked a fierce battle to raise funds by Martin, Brian Tobin and Allan Rock, who all saw themselves as future prime ministers. In July 2001, Jean Pelletier, Chrétien's long-time chief of staff, retired to be replaced with Percy Downe. Canadian journalist Lawrence Martin wrote that Downe was not the chief of staff that Pelletier had been, and after that the departure of Pelletier, the power of Eddie Goldenberg and Françoise Ducros correspondingly increased. Both Goldenberg and Ducros favored a more aggressive, combative approach to handling issues, which in time would lead to a decline in Chrétien's relations with the Liberal caucus. The communications director, Ducros, was one of Chrétien's most loyal supporters, but was widely disliked by the press and Liberal caucus due to her abrasive personality. Typical about the media's view of Ducros was a story about her in The Globe and Mail that had as the title "A Style That Grates on Enemies-and Friends", while the columnist Hugh Winsor wrote that Ducros had a "prickly personality and strident manner" that did not endear her to journalists. Through many Liberal MPs expressed concern about Ducros and Chrétien's other advisor Warren Kinsella, but both Ducros and Kinsella were favorites of Aline Chrétien, who prized both as ultra-loyal with Ducros being especially close to the Prime Minister's wife, which meant the complaints about Ducros and Kinsella were ignored.

On August 7, 2001, the APEC report was issued by Judge Ted Hughes, which cleared Chrétien of wrongdoing, but stated that Jean Carle of the PMO had improperly pressured the RCMP to attack the protesters. Hughes concluded that the RCMP had used excessive force that was in violation of the Charter of Rights and Freedoms. Hughes ruled that the use of force by the RCMP had gone beyond the legitimate security need to protect the visiting leaders at the APEC summit, and was intended to silence the protests altogether, which thus violated the right to freedom of expression guaranteed to all Canadians by the Charter of Rights and Freedoms. Judge Hughes accused Carle of "throwing his weight around" and attempting to interfere with security arrangements. Lawrence Martin expressed some skepticism about Judge Hughes's report, asking if were really possible for Carle, who was Chrétien's chief of operations at the PMO in 1997 and was someone who was especially close to Chrétien, to be directing the RCMP to attack protesters without the Prime Minister knowing. One Liberal later recalled about the Carle-Chrétien relationship that: "I don't know why Chrétien kept a guy like him around. He was always getting him in trouble". Shortly after the Hughes report was issued, Carle became chief of operations at the Just for Laughs comedy festival in Montreal, which promptly received a doubling of federal sponsorship money by the Public Works ministry headed by Alfonso Gagliano, and then a rare retroactive grant of $100,000. Chrétien and Gagliano both denied that Carle's presence had anything to do with the increased grants. In December 2001, the RMCP raided the home of François Beaudoin to investigate alleged wrongdoing that Beaudoin was said to have committed during his time as president of the Business Development Bank of Canada, which the opposition charged was part of an attempt to intimidate Beaudoin for suing for wrongful dismissal. The Solicitor General Lawrence MacAulay rejected claims that government was pursuing a vendetta against Beaudoin, and accused opposition members of trying to smear the RCMP.

Following the September 11 attacks, Canadian forces joined with multinational forces that invaded Afghanistan to pursue al-Qaeda forces. He had also commended how Canada responded to the crisis. Among them included Operation Yellow Ribbon and the memorial service on Parliament Hill three days after 9/11. In January 2002, Chrétien together with the Defense Minister Art Eggleton were accused of misleading Parliament. When asked in Question Period if Canadian troops had handed over captured Taliban and al-Qaeda members in Afghanistan to the American forces amid concerns about the treatment of POWs at Guantanamo Bay, Chrétien stated this was only a "hypothetical question" that could not be answered as the Canadians had taken no POWs. Critics of the government such as Joe Clark then pointed out that in the previous week, the Globe & Mail had run on its front page a photo of Canadian soldiers turning over POWs to American troops. Eggleton maintained that he and the rest of the Cabinet been kept unaware that the Canadian Forces were taking POWs in Afghanistan and turning them to the Americans, claiming that he had only learned of the policy of handing over POWs several days after the photo had appeared in the Globe. When pressed by opposition critics about his apparent ignorance of what was Canada's policy on turning over POWs captured in Afghanistan, Eggleton then claimed that he had not only forgotten that he had been briefed by senior bureaucrats that Canadian forces were to hand over POWs to the Americans, but that he had also forgotten to inform the Cabinet. When pressed by the opposition critics to fire Eggleton under the grounds that the Minister of Defense was either lying to Parliament or, if his story was true, that someone so forgetful should not be directing the Defense Department in the midst of a war, Chrétien informed the House of Commons that: "Myself, cabinet and the Liberal Party have confidence in the abilities and dedication of the Minister of National Defence", and that Eggleton would stay on.

In early January 2002, Chrétien's Quebec lieutenant Alfonso Gagliano resigned as Public Works minister following allegations from the "whistle-blower" Chairman of Canada Lands Jon Grant that Gagliano had involved in improper activities with Canada Lands by selling off Crown land at below market rates to politically well connected buyers. About the sale of a Montreal property valued at $9 million which was sold to Entreprises El-Pine Inc, a firm owned by a well known Liberal contributor for $4 million, the real estate agent Shelia Weitzman told The Montreal Gazette: "That price was a joke". Grant alleged that an aide of Gagliano's had told him in 1998: "The rest of Canada is yours, Quebec is ours", meaning Grant should not concern himself with any land sales in Quebec. Grant claimed that he gone to the Cabinet and the PMO three times between 1998–2001 to express his concerns about Gagliano and certain land sales in Quebec without result, finally leading him to go public with his allegations. Through Chrétien and Gagliano both denied any wrongdoing at Canada Lands, Gagliano resigned to accept the patronage post of ambassador to Denmark after the Holy See had reportedly vetoed his attempt to be appointed ambassador to the Vatican. On January 15, 2002, the Industry Minister Brian Tobin resigned suddenly from the Cabinet to retire to private life. In latter 2001, Tobin had come up with a $1 billion plan for connecting all of Canada to a broadband Internet network, a plan that raised furious objections from Martin, who baulked at the cost. Tobin believed that he had his friend Chrétien behind his Internet broadband project. Eddie Goldenberg of the PMO-who was one of Chrétien's closest advisors—also happened to have visceral dislike of Tobin, and saw the broadband issue as the perfect chance to "screw" Tobin. Goldenberg persuaded Chrétien to drop his support for Tobin's scheme, and then humiliate Tobin by issuing a "mini-budget" that did not include the $1 billion Tobin had requested without informing Tobin in advance. Hurt and humiliated by being "screwed" by Goldenberg, Tobin then resigned from public life. Tobin's resignation eliminated Martin's most serious rival for the Liberal succession, and deprived Chrétien of the one minister who might had been able to rally support behind him in the leadership battles later in 2002. The same month saw Chrétien force Herb Gray into retirement for no discernible reason. Gray had been a Liberal party steward for decades, serving in the cabinets of every prime minister since Pearson and a Chrétien loyalist, so the forced retirement of Gray without offering him a major patronage post offended many within the Liberal Party.

By early 2002, the long-simmering feud with Martin came to a head. A particular concern that had badly strained relations between the Prime Minister and the Finance Minister by early 2002 was Martin's control of the Liberal Party apparatus, especially his control over the issuing of membership forms, which he reserved largely for his own supporters. In January 2002, Brian Tobin complained to Chrétien that the Liberal Party machinery had been "captured" by Martin's followers to the extent that it was now virtually impossible for anyone else to sign up their own followers. This posed a major problem for Chrétien as the Liberals were due to hold a leadership review in February 2003 and owing to Martin's control of the party machinery that it was quite possible that Chrétien would win by such a slim margin that it would be humiliating or even lose the leadership review. In January 2002, an incident occurred which was to greatly damage Chrétien's relations with the Liberal caucus. After Chrétien reorganized the Cabinet in late January 2002, the Liberal M.P. Carolyn Bennett criticised Chrétien at a caucus meeting for not appointing more women to the Cabinet. Chrétien exploded with rage at Bennett's criticism, saying that as a mere backbencher she did not have the right to criticise the Prime Minister in front of the caucus, and attacked her with such fury that Bennett collapsed in tears. Health Minister Anne McLellan recalled in an interview that: "He just blew up. Right off the Richter scale!". Even after Bennett had broken in tears and was so distraught that she could no longer stand, Chrétien gave no mercy and continued to shout abuse at her, leading Intergovernmental Affairs minister Stéphane Dion to conclude that Chrétien wanted to stop his outburst, but was so angry at Bennett that he could not bring himself to do so. Bennett claimed that the Prime Minister's outburst was due to the influence of his communications director, Françoise Ducros, saying that "Francie was probably telling him what a bitch I was" in pressing for more female ministers (Ducros and Bennett were known to very much dislike each other). After the meeting had ended, much of the Grit caucus went over to offer support for Bennett while pointedly ignoring Chrétien while the same night Paul Martin and his wife took Bennett and her husband out to dinner at one of Ottawa's more expensive restaurants as consolation. The Liberal M.P. Bonnie Brown was one of the few MPs who defended Chrétien's tongue-lashing of Bennett, saying "at every single cocktail party she was at, Carolyn Bennett was bad-mouthing the Prime Minister", suggested that Bennett only criticised Chrétien because he refused to appoint her to the Cabinet, and that "You can't have people in your Cabinet who don't have respect. He's very big on respect". The Bennett incident convinced much of the Liberal caucus that Chrétien had become a power-crazed bully, and that it was time for the Liberals to have a new leader. Reflecting their displeasure with Chrétien, in early February 2002 the Liberal caucus elected as their chairman, the outspoken pro-Martin M.P. Stan Keyes (who had already openly mused in 2001 about how it was time for Chrétien to go), who defeated the pro-Chrétien M.P. Steve Mahoney. Chrétien had expected Mahoney to win, and was reported to be shocked when he learned of Keyes's victory, which now given Martin control of the caucus.

The major controversy of the later Chrétien years was the Sponsorship Scandal, which involved more than $100 million distributed from the Prime Minister's Office to Quebec's federalist and Liberal Party interests without much accountability. On May 8, 2002, the Sponsorship scandal broke when the Auditor-General, Sheila Fraser, issued a report accusing Public Works bureaucrats of having broken "just about every rule in the book" in awarding $1.6 million to the Montreal ad firm Groupaction Marketing Inc. The money awarded to Groupaction in three dubious contracts appeared to have disappeared, and the firm had a long history of donating to the Liberals. Opposition critics further suggested that the Public Works minister at the time, Alfonso Gagliano, whom Chrétien had praised as a great patriot, was not just a mere by-stander to questionable contacts associated with the sponsorship program that Fraser had identified. In response to the public outrage, Chrétien argued in speech in Winnipeg that all this was necessary to stop Quebec separatism and justified by the results, stating that: "Perhaps there was a few million dollars that might have been stolen in the process. It is possible. But how many millions of dollars have we saved the country because we have re-established the stability of Canada as an united country? If somebody has stolen the money, they will face the courts. But I will not apologize to Canadians." Chrétien's argument that he had nothing to apologize for in regards to the sponsorship program, and his apparent condoning of corruption as justified by the results of saving Canada fared poorly with the Canadian public, which increasingly started to perceive the Prime Minister as an autocratic leader with a thuggish streak. A poll taken later in May 2002 showed that over half of Canadians believed that the Chrétien government was corrupt.

May 2002 also saw the revelation that the new public works minister, Don Boudria, had spent the weekend of March 16–17, 2002 at an estate owned by Claude Boulay, the president of Groupe Everest advertising firm that head received $55 million in contracts from the public works ministry, apparently for free. Only after the story of Boudria's stay at the Boulay estate broke in May did Boulay cash an $800 cheque from Boudria that was dated March 16, 2002; many found this to be too convenient, and opposition critics suggested that the cheque had been post-dated to explain away what would otherwise have been a major ethical violation on the part of Boudria. Boudria was forced to resign on 26 May, to be replaced with Ralph Goodale. An additional scandal broke later in May 2002 when it was revealed that the Defense Minister Art Eggleton had rewarded a contract worth $36, 500 to research mental illness amongst former soldiers to his former lover Maggie Maier without tender while at the same time the Defense Ministry had already hired a team of experts to research the same subject. As Eggleton was a Paul Martin supporter, Chrétien promptly fired him on May 27, 2002 following a ruling from Howard Wilson that Eggleton had broken conflict-of-interest rules. Some such as the columnist Don Martin believed that Wilson’s swift running against the Martinista Eggleton was suspicious with Martin writing Wilson had within a day ruled that Eggleton had broken conflict-of-interest rules while Martin wrote: “But what would you call the prime minister’s chat with a Crown corporation banker to bail out a hotel linked to a golf course he may still have an interest in? Funny, ethics counsellor Howard Wilson was in a “see no evil” monkey mode on that score”.

In late May 2002, Chrétien tried to curtail Martin's by-then open campaign for the leadership of the party by delivering a lecture to Cabinet to stop raising money for leadership bids within the Liberal Party. At what was described as a "stormy" Cabinet meeting on May 30, 2002, Chrétien stated that he intended to serve out his entire term, and ordered the end of all leadership fundraising. Martin left his cabinet on June 2, 2002. Martin claimed that Chrétien dismissed him from Cabinet, while Chrétien said that Martin had resigned. In his memoirs, Chrétien wrote that he regretted not having fired Martin a few years earlier. In the aftermath of Martin's departure from the Cabinet, there occurred an angry caucus meeting on June 5, 2002 where much of the caucus came out in support of Martin; demanded that he fire his much hated communications director Françoise Ducros, who many MPs claimed was impossible to work with, leading to a chorus of MPs chanting "Bring back Peter, bring back Peter" (a reference to Ducros's predecessor Peter Donolo); and several pro-Martin M.Ps asked forthright for Chrétien to resign. Liberal MP Dan McTeague told Chrétien that "You made a decision for Paul Martin. You should make the same decision for yourself". Many of the MPs accused the PMO of riding roughshod over them, and accused the prime minister of being a bully. Liberal MP Carolyn Parrish recalled about that caucus meeting that she could not believe that "these ungrateful sons of bitches", as she called the pro-Martin MPs, would attack Chrétien at a caucus meeting so openly. For Chrétien's reaction, Parrish stated: "His face was evil. His eyes were like a shark's eyes", and she could not understand why he didn't walk out, saying "Any other person would have, especially knowing that most of those assholes telling you this couldn't get elected dog catcher if they weren't on a Liberal ticket riding on your coattails".

Martin's departure generated a severe backlash from Martin's supporters, who controlled much of the party machinery, and all signs indicated that they were prepared to oust Chrétien at a leadership review in February 2003. To win the leadership review, Chrétien formed a team in early June 2002 comprising his close associates John Rae, David Collenette, Jean Carle, and David Smith who were ordered to sign up as many Chrétienist Liberals as possible for the leadership review. The open split, which was covered extensively on national media, increasingly painted Chrétien as a lame duck. During the summer of 2002, a number of backbencher Liberal MPs associated with Martin started to openly criticise Chrétien's leadership, calling on him to resign now or suffer the humiliation of losing the leadership review. In July 2002, the Martinista Liberal M.P. Liza Frulla told a Montreal radio station that there would be "general relief" within the caucus if Chrétien were to resign immediately. As the feud heated up, Chrétien stated at a speech in Toronto: "I remember in 1993 that we had a star all summer, that we would later call a shooting star. She had a summer job. It was Kim Campbell", and went on to compare Campbell to Martin. Martin replied that "It's been a long time since he's called me a star, shooting or otherwise". Chrétien asked Jim Karygiannis, who had so effective in signing up supporters for him in 1990 to repeat that performance, only to be told by Karygiannis that Chrétien had never rewarded him by appointing him to the Cabinet as he asked for many times over the years, had not even returned his phone calls to set up a meeting to discuss his possible appointment to the Cabinet and that he was now a Martin man. Chrétien tried to change Karygiannis's mind by calling up his dying father in Greece to wish him well to no avail. Karygiannis then called a press conference on July 13, 2002 where he called for Chrétien to retire "with dignity", rather than risk a potentially divisive leadership review. Thomas Worrall Kent, a Liberal elder statesman closely associated with Pearson and Trudeau, stated in an interview that Chrétien was surrounded by sycophants at the PMO, and had lost touch with Canadians. Kent went on to say: "You tend, of course to get surrounded by toadies who won't say anything other than you're wonderful...The present Cabinet is looking pathetic in those terms". Kent ended the interview by sharply asking how loyal Chrétien had been to Turner. Shortly afterwards, Liberal Party president Stephen LeDrew secretly met with Chrétien to inform him that if the leadership review did take place, Chrétien would be doing well if he obtained the support of 20% of the delegates, and urged him to resign to avoid having his career end that way. After less than half the caucus committed to support him in August 2002 by signing a letter indicating their support for the Prime Minister in the up-coming leadership review, Chrétien announced that he would not lead the party into the next election, and set his resignation date for February 2004. Martin was not happy with the 2004 departure date, preferring that Chrétien retire at the end of 2002, but considered it better if Chrétien were to retire than having to defeat him at the 2003 leadership review, which would have been more divisive and would have established the ominous precedent of a Prime Minister being ousted by his own party for no other reason other that someone else wanted the job.

President George W. Bush and Jean Chrétien address the media before a 2002 bilateral meeting.

In October 2002, Lawrence MacAulay was forced to resign as Solicitor General following a ruling from the ethics counselor Howard Wilson that MacAulay had broken conflict-of-interest rules by lobbying the government to fund a police training scheme at Holland College, which was headed by his brother. Both Chrétien and his close associate man Eddie Goldenberg saw the charges against MacAulay as absurd, with Chrétien telling Wilson "Do you want us to be eunuchs in our jobs?" On November 21, 2002, Chrétien's communications director Françoise Ducros was overheard by Robert Fife saying about President Bush "What a moron!", who reported the remark in the next day's edition of The National Post. The next day, Chrétien told the press that Bush was a friend and "He's not a moron at all", leading to headlines in the press such as "Chrétien denies Bush is a moron". Chrétien was highly reluctant to fire Ducros, who was one of his most loyal supporters. That Ducros was especially hated by the Martin fraction of the Liberals was another reason why Chrétien did not wish to fire Ducros, despite the media storm she had provoked. Finally, under strong pressure from the American government, which had quietly made it clear that the continued presence of Ducros would not help Canadian-American relations, Chrétien dismissed Ducros on November 26, 2002. Ducros's successor as communications director, Jim Munson, was a former journalist and a better-liked personality, which led to a marked improvement in the Chrétien government's relations with the media in its last year.

Chrétien's government did not support the US-led 2003 invasion of Iraq. His reasoning was that the war lacked UN Security Council sanction; while not a member of the Security Council, Canada nevertheless attempted to build a consensus for a resolution authorizing the use of force after a short (two to three-month) extension to UN weapon inspections in Iraq. (Critics also noted that, while in opposition, he had also opposed the first US-led Gulf War, which had been approved by the UN Security Council and in 1999 supported NATO air strikes against Serbia, which had no Security Council approval.) In order to avoid damaging relations with the United States, Chrétien agreed to another and more larger deployment of Canadian troops to Afghanistan on February 12, 2003 in order to prove that Canada was still a good American ally, despite opposing the upcoming Iraq war. The Army's commander General, Mike Jeffery, was against the deployment of 2,000 troops to Afghanistan, arguing that "We did not have strategic lift, we lacked certain strategic enablers, certain types of intelligence, certain types of communications. Our logistics capability was weak", and that at most Canada had the capacity to support only 500 troops in Afghanistan. General Jeffery's views were ignored, and Canada sent 2,000 soldiers to Afghanistan in the summer of 2003. In December 2003, it emerged that the Department of National Defense had prepared plans for Canada to send as many as 800 Canadian troops to Iraq if the UN Security Council had authorized it; however, a UN request for an increased deployment of Canadian soldiers to Afghanistan removed this option from the table. This led some of Chrétien's anti-war critics on the left to accuse the Prime Minister of never really being fully opposed to the war. Nonetheless, Canada was the first non-member of the US-led coalition to provide significant financial aid to the post-war reconstruction effort, relative to Canada's size. This move allowed Canadian companies to bid on reconstruction contracts.

To the general public, Chrétien maintained a high approval rating near the end of his term due to several developments. The government under Chrétien's prime ministership also introduced a new and far-reaching Youth Criminal Justice Act in April 2003, which replaced the old Young Offenders Act, and changed the way youths were prosecuted for crimes in Canada. The cooperation of federal, provincial, and municipal governments enabled Vancouver to win the bid to host the 2010 Winter Olympics. The election victory of federalist Jean Charest in April 2003 was widely seen across the country that the Quebec sovereignty movement was in retreat, through Charest's victory had more to do with a tired out and disunited PQ government being rejected by voters than Chrétien's "tough love" programme of the 1990s. His decision not to participate in the Iraq war was popular with a large majority of Canadians but was also criticized as potentially hurting Canadian business interests with the US. On April 30, 2003, the Globe and Mail newspaper ran an editorial that praised Chrétien's leadership and claimed "...we are now the best governed country in the Group of Eight".

Due to mounting pressure from the Martin camp, Chrétien no longer saw his February 2004 resignation date as tenable. His final sitting in the House of Commons took place on November 6, 2003. He made an emotional farewell to the party on November 13 at the 2003 Liberal leadership convention. The following day, Martin was elected his successor. U2 lead singer Bono attended the convention and made a speech, joking "I'm the only thing these two can agree upon."

On December 12, 2003, Chrétien formally resigned as prime minister, handing power over to Martin. Chrétien joined the law firm of Heenan Blaikie on January 5, 2004, as counsel. The firm announced he would work out of its Ottawa offices four days per week and make a weekly visit to the Montreal office. In early 2004, there occurred much in-fighting within the Liberal Party with several Liberal MPs associated with Chrétien such as Sheila Copps and Charles Caccia losing their nomination battles against Martin loyalists.

Retirement

Stéphane Dion makes a speech on October 10, 2008, in Brampton West. Former Prime Minister Jean Chrétien was among notable Liberals at this rally; this was his first time campaigning for anyone, since retirement.

On February 18, 2004, François Beaudoin won his wrongful dismissal suit against the Business Development Bank of Canada. Justice Andre Denis ruled in favor of Beaudoin's claim that he was fired for political reasons in 1999 for trying to call in the loan on the Grand Mere Inn, ruled that Chrétien's former aide Jean Carle and Michel Vennat was guilty of making false criminal and civil charges of wrongdoing against Beaudoin to discredit him for suing the bank, accused Carle of committing perjury during the trial and declared given the "unspeakable injustice" Beaudoin had suffered, told the government not to appeal his ruling because they would be wasting the tax-payers' money if they did. The lingering repercussions of the sponsorship scandal of 2002 reduced the Liberal Party to a minority in the 2004 federal election, may have strengthened the separatist case, and contributed to the government's defeat in the 2006 election. The scandal led to long-running, deep investigations by the Royal Canadian Mounted Police, a federal inquiry, the Gomery Commission, chaired by Justice John Gomery (called by Prime Minister Paul Martin in 2005), and several prosecutions and convictions; the legal process continued to late 2011, more than a decade after the scandal began.

Jean Chrétien testified for the Gomery commission regarding the sponsorship scandal in February 2005. Earlier that year his lawyers tried, but failed, to have Justice John Gomery removed from the commission, arguing that he lacked objectivity. Chrétien contends that the Gomery commission was set up to tarnish his image, and that it was not a fair investigation. He cites comments Gomery made calling him "small town cheap", referring to the management of the sponsorship program as "catastrophically bad", and calling Chuck Guité a "charming scamp". Subsequent to the release of the first report, Chrétien has decided to take an action in Federal Court to review the commission report on the grounds that Gomery showed a "reasonable apprehension of bias", and that some conclusions didn't have an "evidentiary" basis. Chrétien believes that the appointment of Bernard Roy, a former chief of staff to former Progressive Conservative prime minister Brian Mulroney, as chief counsel for the commission was a mistake, as he failed to call some relevant witnesses such as Don Boudria and Ralph Goodale. In his report of November 1, 2005 on responsibility for the sponsorship scandal, Justice Gomery ruled that Chrétien was not responsible for the awarding of advertising contracts in Quebec in which millions were stolen, but did accept Charles Guité's claim that he received his instructions on what program to sponsor and to spend how much money on each program from Jean Pelletier, the chief of staff at the PMO between 1993–2001 and Jean Carle, the director of operations at the PMO between 1993–1998 as the truth.

In September 2004, the "hard federalist" Chrétien was said to have been deeply disappointed by the "soft federalist" Martin's embrace of "asymmetrical federalism" as the federal government's new principle for dealing with the provinces. The Chrétien loyalist Senator Terry Mercer delivered a speech attacking "asymmetrical federalism" as a betrayal of everything the Liberals had worked for and believed in over the 20th century and as potentially threatening to national unity. Mercer's speech was generally believed to have reflected Chrétien's view of "asymmetrical federalism".

In April 2007, Chrétien and Canadian book publishers Knopf Canada and Éditions du Boréal announced they would be publishing his memoirs, My Years as Prime Minister, which will recount Chrétien's years as Prime Minister. The book was announced under the title of A Passion for Politics. It arrived in bookstores in October 2007, in both English and French, but the promotional tour was delayed due to heart surgery. As well Straight from the Heart was republished with a new preface and two additional chapters detailing his return to politics as the leader of the Liberal Party and his victory in the election of 1993. Publisher Key Porter Books timed the re-issuing to coincide with the publication of My Years as Prime Minister.

On October 1, 2007, Chrétien was playing at the Royal Montreal Golf Club, north of Montreal, at a charity golf event. Playing alongside a cardiologist, he mentioned his discomfort, saying he "had been suffering some symptoms for some time" and the doctor advised he come for a check up. After examination, Chrétien was hospitalized at the Montreal Heart Institute, with unstable angina, a sign a heart attack might be imminent. He underwent quadruple heart bypass surgery as a result on the morning of October 3, 2007. The operation forced Chrétien to delay a promotional tour for his book. He was "expected to have a full and complete recovery".

In November 2008, Chrétien and former NDP leader Ed Broadbent came out of retirement to negotiate a formal coalition agreement between the Liberals, the New Democratic Party and the Bloc Québécois, the first power-sharing coalition since the Union government of 1917–18 founded in response to the conscription crisis caused by World War I, in a bid to form a new government to replace the government of Prime Minister Stephen Harper. Harper's request to prorogue parliament was granted by Governor General Michaëlle Jean, staving off the opposition's scheduled motion of non-confidence.

On August 5, 2010, Chrétien complained of experiencing difficulty walking, and was admitted to a hospital. A brain scan was conducted the next day, and it revealed that a 3 centimeter wide subdural hematoma was pushing 1.5 centimeters into his brain. Emergency surgery was then performed that afternoon, and the blood was successfully drained. He was released from hospital on August 9, 2010. Doctors, who were impressed with the speed of his recovery, ordered him to rest for two to four weeks.

He is a member of the Fondation Chirac's honour committee, ever since the foundation was launched in 2008 by former French president Jacques Chirac in order to promote world peace.

He is also a member of the Club de Madrid, a group of former leaders from democratic countries, that works to strengthen democracy and respond to global crises.

In March 2013, Chrétien criticized Stephen Harper's foreign policy, sparking some debate about the different degrees of influence Canada has held in foreign affairs under the two premiers. His interview with the Globe and Mail prompted a follow-up article by Conrad Black in the National Post. On September 12, 2015, Chrétien published an open letter to Canadian voters in multiple newspapers in which he criticized Harper's response to the European migrant crisis, stating that Harper has turned Canada into a "cold hearted" nation and he has "shamed Canada". "I am sad to see that in fewer than 10 years, the Harper government has tarnished almost 60 years of Canada's reputation as a builder of peace and progress.", Chrétien stated before imploring voters to topple the Harper government in the upcoming election.

Supreme Court appointments

Chrétien chose the following jurists to be appointed as justices of the Supreme Court of Canada by the governor general:

• Michel Bastarache (September 30, 1997 – June 30, 2008)
• William Ian Corneil Binnie (January 8, 1998 – October 21, 2011)
• Louise Arbour (September 15, 1999 – June 30, 2004)
• Louis LeBel (January 7, 2000– November 30, 2014)
• Beverly McLachlin (as Chief Justice, July 7, 2000 – present; appointed a Puisne Justice under Prime Minister Mulroney, March 30, 1989)
• Marie Deschamps (August 7, 2002 – August 7, 2012)
• Morris J. Fish (August 5, 2003 – August 31, 2013)

Appointments to the Senate

Chrétien advised 75 appointments to the Senate.

Senator Region Date appointed Doris Margaret Anderson (Prince Edward Island) 1995-09-21 George Baker (Newfoundland and Labrador) 2002-03-26 Tommy Banks (Alberta) 2000-04-07 Michel Biron (Quebec) 2001-10-04 James Bernard (Bernie) Boudreau (Nova Scotia) 1999-10-04 John G. Bryden (New Brunswick) 1994-11-23 Catherine S. Callbeck (Prince Edward Island) 1997-09-22 Sharon Carstairs (Manitoba) 1994-09-15 Maria Chaput (Manitoba) 2002-12-12 Jane Cordy (Nova Scotia) 2000-06-09 Joseph A. Day (Saint John-Kennebecasis) 2001-10-04 Percy Downe (Charlottetown, PEI) 2003-06-26 Joan Fraser (De Lorimier - Quebec) 1998-09-17 George Furey (Newfoundland and Labrador) 1999-08-11 Mac Harb (Ontario) 2003-09-09 Céline Hervieux-Payette Quebec (Bedford) 1995-03-21 Elizabeth Hubley (Prince Edward Island) 2001-03-08 Mobina S. B. Jaffer (British Columbia) 2001-06-13 Serge Joyal (Kennebec, Quebec) 1997-11-26 Raymond Lavigne (Montarville, Quebec) 2002-03-26 Rose-Marie Losier-Cool (Tracadie, N.B.) 1995-03-21 Frank W. Mahovlich (Toronto, Ontario) 1998-06-11 Paul J. Massicotte (De Lanaudière - Quebec) 2003-06-26 Terry M. Mercer (Northend Halifax, Nova Scotia) 2003-11-07 Pana Merchant (Saskatchewan) 2002-12-12 Wilfred P. Moore (Stanhope St. / South Shore, Nova Scotia) 1996-09-26 Jim Munson (Ottawa / Rideau Canal, Ontario) 2003-12-10 Lucie Pépin (Shawinegan, Quebec) 1997-04-08 Marie-P. Poulin (Charette) (Northern Ontario) 1995-09-21 Vivienne Poy (Toronto, Ontario) 1998-09-17 Pierrette Ringuette (New Brunswick) 2002-12-12 Fernand Robichaud (New Brunswick) 1997-09-22 Bill Rompkey (Newfoundland and Labrador) 1995-09-21 Nick G. Sibbeston (Northwest Territories) 1999-09-02 David P. Smith (Cobourg, Ontario) 2002-06-25

Legacy

In general, Chrétien supported Pierre Trudeau's ideals of official bilingualism and multiculturalism, but his government oversaw the erosion of the welfare state established, and built, under William Lyon Mackenzie King, Louis St. Laurent, Lester Pearson and Pierre Trudeau. His government advocated neo-liberal policies on a number of economic fronts, cutting transfer payments to the provinces and social programs, supporting globalization and free trade and implementing large personal and corporate tax cuts. However, in 1999 his government negotiated the Social Union Framework Agreement, which promoted common standards for social programs across Canada.

Chrétien was repeatedly attacked by both his opponents and supporters for failing to live up to key election promises, such as eliminating the so-called "golden handshake" by which politicians receive a substantial life-time pension after serving a mere five years in elected office. Other unkept election promises included replacing the GST and renegotiating the North American Free Trade Agreement (NAFTA). Some point to the "No" result of the 1995 Quebec referendum on separation as a political victory for Chrétien, while others interpret the extremely slim margin as a near-disaster for which Chrétien, as de facto leader of the "No" campaign, was responsible. However, some argue that his post-referendum efforts at addressing the separatist issue, notably through the Clarity Act, will cement his legacy as a staunchly federalist prime minister.

One of the most pressing issues in Chrétien's final years in office was Canada's relationship with the United States. Chrétien had a close relationship with President Bill Clinton, but had previously attacked Brian Mulroney for being too friendly with both Ronald Reagan and George H. W. Bush, and he did not have a warm relationship with President George W. Bush either. Very soon after his retirement, Chrétien's legacy was marred by the sponsorship scandal. Nevertheless, many of his closest and longtime political allies were fired from government jobs by his successor Paul Martin, with whom he had fought a bitter leadership battle. The scandal also put a question mark over Chrétien's preferred style of governance, which had been in question long before his retirement due to various scandals, particularly involving cabinet minister Alfonso Gagliano.

Martin, who was cleared by Justice Gomery, moved to sharply distance himself from the Chrétien legacy, although this was also due to the at times bitter political rivalry between the two men. Chrétien's supporters have accused Martin of trying to elude responsibility by blaming the scandal on the former. In an unprecedented move, many of Chrétien's most loyal ministers were not included in Martin's cabinet and many of those were also forced to contest their nominations in uphill contests against Martin's appointed candidates. As a result, most of them were forced to retire, although Sheila Copps contested and lost the Liberal nomination in her riding. The Chrétien-Martin rift has also divided the Liberals in the 2004 and 2006 elections, with some Chrétien supporters such as Terry Mercer, John Rae and Peter Donolo complaining of being sidelined despite their extensive campaign expertise.

During his tenure as Prime Minister, Chrétien was active on the world stage and formed close relationships with world leaders such as Jacques Chirac, John Major, and Bill Clinton. His name was rumoured as a replacement for Kofi Annan as Secretary General of the United Nations.

Chrétien was appointed a Companion of the Order of Canada on June 29, 2007. He was appointed to the Order of Merit by Queen Elizabeth II in July 2009 and received the insignia of the order from the Queen on October 20, 2009.

Jean Chrétien is an Honorary Member of The International Raoul Wallenberg Foundation.

Chrétien was ranked #9 greatest Prime Minister in a survey of Canadian historians in 1999 that ranked them all through his time in office. The survey appeared in Prime Ministers: Ranking Canada's Leaders by J.L. Granatstein and Norman Hillmer.

Honorary degrees

Honorary Degrees

Country	Date	School	Degree
Ontario	1981	Wilfrid Laurier University	Doctor of Laws (LL.D)
Ontario	1982	Laurentian University	Doctor of Laws (LL.D)
Ontario	1986	York University	Doctor of Laws (LL.D)
Alberta	1987	University of Alberta	Doctor of Laws (LL.D)
Ontario	1988	Lakehead University	Doctor of Laws (LL.D)
Ontario	1994	University of Ottawa	Doctor of the University (D.Univ)
New Brunswick	1994	University of Moncton
Japan	1996	Meiji University	Doctorate
Poland	1999	Warsaw School of Economics	Doctorate
Michigan	1999	Michigan State University	Doctor of Laws (LL.D)
Israel	2000	Hebrew University of Jerusalem
Newfoundland and Labrador	2000	Memorial University of Newfoundland	Doctor of Laws (LL.D)
Dominican Republic	2003	Pontificia Universidad Católica Madre y Maestra
Ontario	2004	Queen's University	Doctor of Laws (LL.D)
Ontario	2005	McMaster University	Doctor of Laws (LL.D)
Ukraine	2007	National University of Kyiv-Mohyla Academy
Ontario	2008	University of Western Ontario	Doctor of Laws (LL.D)
Quebec	2008	Université du Québec à Trois-Rivières
Quebec	2010	Concordia University	Doctor of Laws (LL.D)
Quebec	2011	Université de Montréal
Manitoba	12 June 2014	University of Winnipeg	Doctor of Laws (LL.D)

Personal life

Jean and Aline Chrétien at the 300th anniversary of Saint Petersburg celebrations on May 30, 2003.

Chrétien married Aline Chaîné of Shawinigan on September 10, 1957. They met when they were just 13 years old. They have three children. Their eldest is daughter France Chrétien Desmarais (b. 1958), who is a lawyer, and is married to André Desmarais, the son of Paul Desmarais, Sr., and the President and Co-Chief Executive Officer of his father's founding company the Power Corporation, based in Montreal, Canada. France and André have four children. Jean and Aline Chrétien also have two sons: Hubert (b. 1965) and Michel Chrétien (b. 1968). Hubert is a scuba diving instructor and a pioneer in teaching scuba diving to people with disabilities.

Former Premier of New Brunswick and Canadian Ambassador to the United States, Frank McKenna said "In terms of the personality of Jean Chrétien, what you see is what you get, with few surprises. As a political leader, what you need to know about him is that, more than anything else, he is a pragmatist."

Chrétien would often make light of his humble, small-town origins, calling himself “le petit gars de Shawinigan”, or the “little guy from Shawinigan”. Upon his first election in 1963, Chrétien did not speak English. While in parliament, he found two mentors who were anglophone: Mitchell Sharp and Lester B. Pearson. He did not learn to speak English until age 30.

His nephew, Raymond Chrétien, was appointed by his uncle as the Ambassador to the United States.

See also

• List of Canadian Prime Ministers

Further reading

Main article: List of books about Prime Ministers of Canada

• Chrétien, Jean (2007). My Years as Prime Minister. Toronto: Knopf Canada. ISBN 0-676-97900-9.
• Chrétien, Jean (1985). Straight from the Heart. Toronto: Key Porter Books. ISBN 1-55013-576-7.
• Jeffrey, Brooke (2010). Divided Loyalties: The Liberal Party of Canada, 1984–2008. Toronto: University of Toronto Press. ISBN 1442610654. {{cite book}}: line feed character in |title= at position 19 (help)
• Martin, Lawrence (1995). Chrétien: The Will to Win. Toronto: Lester Publishing. ISBN 1-895555-95-7.
• Martin, Lawrence (2003). Iron Man: The Defiant Reign of Jean Chrétien. Toronto: Penguin Group (Canada). ISBN 0-670-04310-9.
• Double Vision: The Inside Story of the Liberals in Power, by Edward Greenspon and Anthony Wilson-Smith, Toronto 1996, Doubleday Canada publishers, ISBN 0-385-25613-2.
• One-Eyed Kings, by Ron Graham, Toronto 1986, Collins Publishers, ISBN 0-00-217749-8.
• Prime Ministers: Ranking Canada's Leaders by J.L. Granatstein and Normal Hillmer, Toronto, HarperCollinsPublishersLtd., 1999, ISBN 0-00-200027-X.

Academic

• Harder, Lois, and Steve Patten, eds. (2006). The Chrétien Legacy:Public Policy in Canada. Montreal: McGill-Queen's University Press. ISBN 0-7735-3107-6. {{cite book}}: |first= has generic name (help)CS1 maint: multiple names: authors list (link)
• McWhinney, Edward (2003). Chrétien and Canadian Federalism: Politics and the Constitution, 1993-2003. Vancouver: Ronsdale Press. ISBN 1-55380-006-0.

External links

• Jean Chrétien – Parliament of Canada biography
• Jean Chrétien Editorial Cartoon Gallery
• CBC Digital Archives – Jean Chrétien: From Pool hall to Parliament Hill
• Joseph-Jacques-Jean Chrétien, by Robert Bothwell
• The Red Book
• Jean Chrétien at IMDb
• Order of Canada Citation
• Concordia University Honorary Degree Citation, June 2010, Concordia University Records Management and Archives