Canada's Finance Minister Jim Flaherty speaks during Question Period in the House of Commons on Parliament Hill in Ottawa November 20, 2012. (Reuters/CHRIS WATTIE)

OTTAWA — A last-minute deal by American legislators to avoid the much ballyhooed fiscal cliff doesn't mean Canada's economy is safe from a broadside.

While stock markets reacted favourably Wednesday to the deal struck in U.S. Congress on New Year's Day, economists and Finance Minister Jim Flaherty caution the Canadian economy is still vulnerable to inaction and squabbling.

"Canada welcomes the agreement reached between the president and the Congress that protects the U.S. economy in the short term," Flaherty said.