On November 4, 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 a masterful knowledge of the Canadian parliamentary system, and allowed Chrétien to establish a very centralized government that, although highly efficient, was also lambasted by critics as being a "friendly dictatorship" and intolerant of internal dissent.
Chrétien entered office in as strong a position as any newly elected Liberal prime minister since
Louis St. Laurent. With 123 more seats than the next largest party, he could have enacted virtually any program he wanted. He turned most of his attention to clearing away the massive debt he'd inherited from Mulroney. He was assisted by Martin, who had been promised the Finance portfolio for his work in authoring the Red Book. 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, $36 billion in debt was paid down, and taxes were cut by $100 billion (cumulatively) over 5 years, the largest tax cut in Canadian history. There were, however, undeniable costs associated with this endeavour. The cuts would result 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 would be restored in later years of Chrétien's period in office.
One of Chrétien's main focuses in office was preventing the separation of the province of Quebec, which was ruled by the
separatist Parti Québécois for nearly the Prime Minister's entire term. After the
1995 referendum very narrowly defeated a proposal on Quebec sovereignty, the government passed what became known as the
Clarity Act, which said that no Canadian government would acknowledge a Quebec declaration of independence unless a "clear majority" supported sovereignty in a referendum based on a "clear question", as defined by the Parliament of Canada. The size of a "clear majority" was left unspecified, but the Supreme Court of Canada made it clear that such a majority would not be "50% plus one vote".
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. It is said Jean was ready to defend himself with a sharp-edged
Inuit carving.
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 summit 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. Demonstrators tore down a barrier and were pepper sprayed. Other peaceful demonstrators were subsequently pepper sprayed as well. There was debate over whether the action was necessary. Chrétien responded to the media's questions about the incident by saying "For me, pepper, I put it on my plate." Allegations soon arose that someone in the Prime Minister's Office or Chrétien himself gave the go-ahead for the pepper spraying of protestors. Chrétien denied any involvement.
In
1999, Chretien supported Canada's involvement in
NATO's bombing campaign of
Yugoslavia over the issue of
Kosovo. The
1999 NATO bombing of the Federal Republic of Yugoslavia was NATO's and Canada's most controversial act as it's first deliberate non-defensive aggression against another sovereign state.
The government under Chrétien's prime ministership also introduced a new and far-reaching
Youth Criminal Justice Act, which replaced the old
Young Offenders Act, and changed the way youths were prosecuted for crimes in Canada.
Chretien was known to be friendly in foreign policy towards the
People's Republic of China. He led four "Team Canada" trade missions to China, and sharply increased the amount of trade between the two countries during his tenure as Prime Minister. Under his leadership, China and Canada signed several bilateral relations agreements. Immigration policy under Chretien was also seen as generally favourable towards Chinese immigrants.
Following the
September 11 terrorist attacks upon the United States, North American airspace was shut down and many Canadians opened up their homes to stranded travellers. Chrétien praised
Operation Yellow Ribbon, saying that it was one of the ways it showed the best of Canadians in a time of tragedy for their American friends and neighbours down south. In response to those attacks, Canadian forces joined with multinational forces that invaded
Afghanistan to pursue
al-Qaeda forces there.
Chrétien directed the
Crown not to 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.) Although criticism from right-wing opposition was vocal, the move proved popular with the Canadian public in general. In December of 2003, it emerged that the government 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.
Chrétien's term was marked by two major brushes with scandal. In 2000, after initial denials, he acknowledged having lobbied the Business Development Bank of Canada to grant a $2 million loan to Yvon Duhaime, a friend and constituent to whom the Prime Minister had sold his interest in a local resort. The bank had turned down the initial application, but later approved a $615,000 loan following further lobbying by Chrétien. The application became controversial when it was revealed that Chrétien had never been paid for his share in the sale of the adjoining golf course, and by criminal charges against Duhaime. The Prime Minister's ethics counsellor determined that Chrétien had not violated any conflict-of-interest rules, noting that there were no clear guidelines on such matters.
The other major controversy of the Chrétien years was the
sponsorship scandal. The Gomery Commission, First Phase Report, which later assigned blame for the scandal, cast most of the indemnity for misspent public funds and fraud on Chrétien and his Prime Minister's Office staff. The lingering repercussions of the scandal reduced the
Liberal Party to a minority in
2004, and contributed to the government's defeat in
2006.
Chrétien came under fire for backtracking on some of his promises, most notably the GST. Instead of scrapping it, he replaced it with the
Harmonized Sales Tax in three
Atlantic provinces. However, Chrétien claimed that the fiscal situation was far worse than expected. Despite slipping poll numbers, he advised the Governor General to call an election for
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. He was reelected with a considerably reduced mandate. However, they still finished with 95 more seats than the next-largest party. The Liberals rebounded in
2000, nearly tying their 1993 total.
Throughout his prime-ministership, Chrétien faced only weak opposition in the House of Commons. This was partly because he governed with majorities for the whole time, and with quite large ones for most of it; and partly because of the peculiar state of the opposition parties. During his first parliament, the
Official Opposition was the
Bloc Québécois, which was more concerned with gaining sovereignty for Quebec than with playing the customary role of a parliamentary opposition. That role was to some extent taken on by
Reform, which had become the leading right-wing party, and which held only marginally fewer seats than the Bloc. The Bloc faded somewhat in the 1997 election, while the Reform Party gained and so took over as Official Opposition for next parliament. Reform, though, began as a Western protest party, and never altogether lost that character. Moreover, Reform was seen as too extreme by most Canadians, especially those east of Manitoba, where the party never had much success. Even after Reform renewed itself as the
Canadian Alliance, in 2000, it gained only slightly on Chrétien. The other two parties in the House of Commons, the leftish
New Democratic Party and the formerly powerful, center-right
Progressive Conservatives, held only a few seats each, and their parliamentary effect was accordingly slight.