http://ca.news.yahoo.com/s/reuters/081128/n_top_news/cnews_us_politics_canada
By Randall Palmer
OTTAWA (Reuters) - Canada's minority government teetered on the edge of collapse on Friday, just six weeks after its re-election, as opposition parties talked of forming a coalition to replace the ruling Conservatives.
Both the Conservatives and the three opposition parties were engaged in high-stakes brinkmanship over the fiscal update that Finance Minister Jim Flaherty presented on Thursday.
The opposition said the update did not contain needed stimulus for an economy increasingly squeezed by the global downturn, but they were most angered by a planned end to direct public financing of political parties.
If neither side blinks, the government will likely fall, perhaps as early as Monday, and Canada would either head into a snap election or into some sort of coalition led by the opposition Liberals.
"Canadians ... just might get a Christmas present next week and have the Conservatives turfed, which is exactly what they deserve for their mismanagement of the economy," Thomas Mulcair, deputy leader of the leftist New Democratic Party, told CBC television.
The Conservatives were in no mood to back down, however, although they did announce that the first confidence vote on the fiscal update -- due on Monday -- would not be on the public financing proposal. That will be included in a separate financial bill and no vote on that has yet been set.
"We're not anticipating changing our agenda," Kory Teneycke, a top spokesman for Prime Minister Stephen Harper, told CTV television, accusing opposition parties of trying to subvert democracy.
"This is an attempt to take control of the government without actually having to go to the electorate in a democratic vote," Teneycke said, noting that the Conservatives won a strengthened minority in last month's election.
CANADIAN DOLLAR SLIDES
The uncertainty helped push down the Canadian dollar. At 12.10 p.m., it was at C$1.2378 to the U.S. dollar, or 80.79 U.S. cents, down from C$1.2311 to the U.S. dollar, or 81.23 U.S. cents, at Thursday's close.
"A lot of investors are rewarding governments that are showing strong leadership on the financial crisis and it looks like we're (Canada) going to be thrown into disarray," said David Watt, currency strategist at RBC Capital markets.
The New Democrats' Mulcair said all three opposition parties -- the NDP, the Liberals and the separatist Bloc Quebecois -- had consulted with one another more intensively than usual in the last 48 hours.
Former Liberal Prime Minister Jean Chretien and former NDP leader Ed Broadbent were working behind the scenes on possibilities for a coalition government.
If the Conservatives lose the vote in the House of Commons, Harper would go to Governor General Michaelle Jean -- the representative of Canada's head of state, Queen Elizabeth -- to say he has lost the confidence of Parliament.
Harper could ask Jean to call an election but experts said she could also call upon the opposition to see if it could form government instead.
If the Liberals and NDP sought to form a coalition, they would also have to rely on at least the tacit support of the Bloc Quebecois. That could present a major difficulty because the Bloc is dedicated to breaking up Canada.
"They'll have to answer to the Canadian people if they make certain coalitions," Flaherty said..
The Conservatives have 145 members, including two allied independents, in the 308-seat House. The Liberals have 77 and the New Democrats 37 -- totaling only 114 and well short of the 155 needed for a majority. They would thus need the backing of the Bloc, which has 49 seats.
In recent past political crises, the Liberals have often backed away from bringing down the government because of their weak political position, but this time they seem to smell power.
Canadian newspapers united to condemn what they said was an act of crass political gamesmanship by the prime minister.
(Additional reporting by David Ljunggren; editing by Rob Wilson)
