UPDATE 3-Ignatieff seen moving Canada's Liberals to center

(Adds decision to announce leader, paragraphs 1, 5, 16)

By Randall Palmer

OTTAWA, Dec 9 (Reuters) - Canada's opposition Liberals will shift away from the left and name former Harvard professor Michael Ignatieff on Wednesday to lead the party against the Conservative government after the Liberals suffered a crushing defeat at the polls in October.

The path cleared for Ignatieff to become leader of Canada's main opposition party on Tuesday, when the last of his rivals bowed out of the race to succeed Stephane Dion, who had moved the Liberals to the left when he took the party over in 2006.

Bob Rae, who is also on the left of the party, pulled out after he said it became clear he did not have enough support.

"We have a fine leader in Michael. We've got every prospect of forming a government and winning whatever elections may come, or forming a government with our coalition partners," Rae told a news conference held to announce his decision.

The Liberal Party will appoint Ignatieff as interim leader on Wednesday afternoon, with the expectation he would lead the party if there were an election in the next few months and that he would be made permanent leader at the party convention in May.

Ignatieff has been the lead advocate of restraint in the party, however, pledging that the Liberals would think twice before voting to topple the minority Conservative government in confidence votes expected in late January or early February.

His rival Rae had been and remained an advocate of joining the leftist New Democratic Party and the separatist Bloc Quebecois in trying to install a Liberal-NDP government.

The three parties had signed an agreement to do just that a little more than a week ago, but Ignatieff subsequently said a vote against the government should not be automatic and the party should wait to see what is in the budget on Jan. 27.

The coalition idea fell flat with the Canadian public and boosted the Conservatives' support to the extent that they might win a majority government if an election were held now.

Conservative Prime Minister Stephen Harper reached out to the next Liberal leader, offering to sit down with him to find common ground on the economy and saying it was too soon for Canada to hold another election after the Oct. 14 vote.

"You can have it a couple years from now. For now, I think the big national parties should be working together to fix the economy, and we're more than willing to do that," Harper told CBC television on Tuesday.

Under Dion, the Liberals had often leaned more to the left on issues such as taxation, foreign policy and the environment, leaving the Conservatives free to woo a larger chunk of the central political spectrum than before.

Ignatieff is likely to try to recapture some of that center ground. He is also a more formidable campaigner, eloquent in both English and French and able to focus more on the big picture than the academic-style detail that Dion delighted in.

RAPID CHANGES

The political landscape has changed with breathtaking speed in recent days, moving from relative political peace less than two weeks ago to the possibility of a coalition taking over last week and a suspension of Parliament until late January.

Developments over the leadership of the Liberal Party further intensified the turmoil. Dion had first said he would stay on till a leadership convention in May but bowed to pressure on Monday and said he would step down as soon as a replacement was chosen.

Early on Tuesday morning, the party said it would try to choose an interim leader by Dec. 17 after consulting senior Liberals, by early afternoon Rae announced he had quit the race and by evening it said it would announce the new leader by about 2 p.m. EST (1900 GMT) on Wednesday.

Ignatieff will have to balance the pressures within the Liberal from those who urge caution against those, like Rae, who think Harper has to be replaced now on the grounds that he undermined democracy by seeking to suspend Parliament and that he is not doing enough to boost the economy.

"Those are two good reasons to say, 'Time's up, chum,' and that's what I think we should be saying to Mr. Harper, and I hope very much we can stay that course," Rae said, adding that he did not want right-wing Conservatives running his country. (Editing by Rob Wilson and Mohammad Zargham)