By Randall Palmer and David Ljunggren
OTTAWA (Reuters) - Canada's opposition parties have reached a tentative deal to form a coalition that would replace Prime Minister Stephen Harper's minority Conservative government less than two months after its reelection, a senior negotiator said on Monday.
The deal, which has yet to be formally signed, was struck late on Sunday after talks between the main opposition Liberals and the left-leaning New Democrats, who insist the government must go because it has failed to tackle the effects of the global financial crisis.
"A very constructive, positive agreement has been reached between the Liberal Party of Canada and the New Democratic Party that will bring stimulus to the economy," said former New Democrat leader Ed Broadbent, who took part in the talks.
"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," he told reporters.
The agreement includes aid for the suffering auto and forestry sectors, Broadbent said.
The New Democrats said one option would be a contract seeking to ensure the government's survival for 2-1/2 years. The Liberals denied a report the new government would bring in a C$30 billion (16 billion pound) stimulus package.
Parliament is due to hold a confidence vote on Dec 8 and if the government loses, the opposition parties could get their chance to run the country.
Liberal and New Democrat legislators met separately on Monday to discuss the outline deal. Some senior Liberals expressed caution, urging the parties not to move too fast.
Whether a coalition could last anywhere near 2-1/2 years is in some doubt since the Liberals and New Democrats would have to rely on the separatist Bloc Quebecois for support.
This could pose some sensitive political challenges. The Bloc Quebecois 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.
"We have identified a certain number of priorities, and those priorities we want to have specifically in the agreement," said top Bloc legislator Pierre Paquette.
Such language could well infuriate the influential oil-producing province of Alberta, a hotbed of Conservative support. There are no Liberal legislators from Alberta.
The chaos has knocked down the value of the Canadian dollar and there is potential for more uncertainty.
The Conservatives, who won a strengthened minority in the October 14 election, say the three parties are trying to subvert democracy.
"What this is all about is the opposition wanting to take power without an election. They don't want to earn the right to govern, they just want to take it," federal Transport Minister John Baird told CTV television.
One option for the government would be to prorogue -- or temporarily shut down -- Parliament to let tempers cool. Ministers say they haven't decided whether to use this tactic.
The Liberals and New Democrats have a total of 114 seats in the 308-seat Parliament. The Conservatives have 143.
The opposition is also furious that Ottawa said last week it would scrap public financing for political parties.
Such a move would cripple the opposition parties, which rely much more on public financing than the Conservatives. The government withdrew the proposal on Saturday but the opposition say they can no longer trust Harper.
Media reports said the new government would have 24 ministers, of whom 18 would be Liberals and six New Democrats. The Liberals have governed Canada longer than any other party while the New Democrats have never been in power federally.
One potential sticking point is who would lead a coalition government. The Liberals have more parliamentary seats, so leader Stephane Dion would in theory be the leading candidate.
Dion, though, led the Liberals to such a bad defeat in the October 14 election that he will step down after the party chooses a new chief next May. A move to make him prime minister so soon after such a crushing loss is bound to be controversial.
Most Liberal legislators support ex-Harvard academic Michael Ignatieff, the front-runner in the leadership race, raising the prospect that they might try to force Dion to step down early. Under party rules Dion is not obliged to quit until the May leadership convention.
(Additional reporting by Louise Egan; Editing by Jeffrey Jones and Peter Galloway)
