Mark Carney’s announcement comes a day after the UK said it will recognise Palestine as a state in September unless Israel meets certain conditions.
France became the first G7 country to announce the move last week – while Ireland, Spain and Norway all officially recognised a Palestinian state last year.
Mr Carney told reporters in Ontario on Tuesday that Canada would do the same on certain conditions – including that the Palestinian Authority commits to fundamentally reforming its governance and to hold general elections in 2026 in which Hamas can play no part.
Following the announcement, the Israeli foreign ministry said in a statement: “The change in the position of the Canadian government at this time is a reward for Hamas and harms the efforts to achieve a ceasefire in Gaza and a framework for the release of the hostages.”
A White House official later anonymously told Reuters that US President Donald Trump also believes recognising Palestinian statehood would be a reward for Hamas and he does not intend to do so.
Mr Carney said during his news conference that he spoke with Mahmoud Abbas, the president of the Palestinian Authority, on Wednesday before announcing the move.
The Canadian prime minister also said he “condemns the fact Israel has allowed a catastrophe to unfold in Gaza”.
He added that the possibility of a “two state solution” is being “eroded before our eyes” and that Canada is “trying to ensure, with partners, that a two-state solution becomes viable”.
Mr Carney also said: “We are working ourselves with others, to preserve the possibility of a two-state solution, to not allow the facts on the ground, deaths on the ground, the settlements on the ground, the expropriations on the ground, to get to such an extent that this is not possible.”
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British Prime Minister Sir Keir Starmer announced the UK could recognise a Palestinian state on Tuesday after he had a meeting with US President Donald Trump the previous day.
Sir Keir said the conditions Israel would have to meet in order to avoid such a move included taking substantive steps to end the “appalling situation in Gaza” and agreeing to a ceasefire.
Some 38 members of the House of Lords, including some of the UK’s most eminent lawyers, have since written to the attorney general to say that recognising a Palestinian state could be a breach of international law, The Times has reported.
They have said the territory may not meet the criteria for statehood under the Montevideo Convention, a treaty signed in 1933.
Meanwhile, a Downing Street spokesperson confirmed Sir Keir had spoken to Mr Carney over the phone on Tuesday.
The spokesperson said: “They discussed the grave situation in the Middle East and last night’s action by the United States to tackle the severe threat posed by Iran’s nuclear programme.
“Both reiterated their support for a diplomatic solution and agreed that Iran must come back to the negotiating table with the United States as soon as possible.
“They looked forward to continuing their discussions at NATO this week.”
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