Canada opposition signs deal to defeat government

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By Randall Palmer and David Ljunggren

OTTAWA (Reuters) - The leaders of Canada's three opposition parties signed a historic deal on Monday committing them to bringing down the minority Conservative government and then forming a coalition government of their own.

The Liberals, New Democrats and separatist Bloc Quebecois say the Conservatives of Prime Minister Stephen Harper -- who won a strengthened minority in an Oct 14 election -- are not doing enough to help Canadians cope with the worsening financial crisis.

The Liberals and New Democrats signed a formal coalition deal and will split cabinet posts between them. The Bloc is promising to back the government for 18 months.

A confidence vote has been set for next Monday. The proposed coalition government would be the first of its kind in modern Canadian history.

"We're seeing a sad spectacle from Stephen Harper's government ... (it) has shown it has no plan, no competence and no will to face up to the crisis," Liberal leader Stephane Dion said after the signing.

"The opposition parties have decided it is time to take action ... we're ready to form a new government," he told a news conference.

The parties agreed that Dion - who led his party to a big defeat in the Oct 14 election -- would head a coalition government if it were formed.

Given Dion's poor campaign performance, the choice is likely to be controversial. He has already agreed to step down next May once a replacement is chosen.

The parties are also angry that Prime Minister Stephen Harper last week proposed to end public financing for political parties, a move that would have hit the opposition particularly hard. The opposition said that move showed they could no longer trust Harper, who took power after the January 2006 election.

One way out for the government would be to prorogue -- or temporarily shut down -- Parliament to let tempers cool. National Revenue Minister Jean-Pierre Blackburn told reporters that proroguing was an option but gave no further details.

Harper, speaking before the deal was signed, accused his rivals of trying to subvert democracy.

"I'm sure all Canadians will really ask themselves whether overturning the results of an election a few weeks later in order to form a coalition that nobody voted for ... and can govern only with the veto of the people who want to break up this country -- do they really believe that is in the interests of this country?" he told Parliament.

Environment Minister Jim Prentice called the proposed coalition "a poisonous and temporarily happy alliance".

The deal calls for a 24-member cabinet, with 18 seats going to the Liberals and six to the New Democrats. The left-leaning New Democrats said the deal would stimulate the economy.

"There are going to be a lot of jobs, a protection of pensions and I think we can look forward to a very constructive period," NDP negotiator Ed Broadbent told reporters.

The agreement includes aid for the suffering auto and forestry sectors, Broadbent said.

The Liberals denied a report the new government would bring in a C$30 billion (16 billion pound) stimulus package.

Working with the Bloc Quebecois will be a challenge. The Bloc was clearly delighted by the deal, saying it would have a hand in crafting the government's agenda as well as the budget, although it would not be represented in cabinet, nor officially be a part of the coalition.

The chaos has knocked down the value of the Canadian dollar and there is potential for more uncertainty as markets digest the fact the government was relying on the backing of the Parti Quebecois, a party dedicated to breaking up Canada.

The Liberals and New Democrats have a total of 114 seats in the 308-seat Parliament. The Conservatives have 143.

The Liberals have governed Canada longer than any other party, while the New Democrats have never been in power federally.

(Reporting by David Ljunggren; editing by Peter Galloway)

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