UPDATE 1-Canadian prime minister sues opposition Liberals

(Adds Liberal reaction, paragraphs 6-7)

OTTAWA, March 13 (Reuters) - Canadian Prime Minister Stephen Harper sued the opposition Liberal Party for libel on Thursday, after the Liberals charged that his Conservative Party had tried to bribe a member of Parliament and said Harper knew about it.

"For the past couple of weeks, both inside and outside of Parliament, the Liberal Party and its agents have been making allegations against me that are of a criminal nature, that are absolutely false, that are despicable," Harper told Parliament as he announced the C$2.5 million ($2.5 million) suit.

"Today my representatives have filed a statement of claim in a court of law, and I look forward...to seeing the leader of the opposition (Stephane Dion) actually let this go to trial so he can hear the whole truth and admit his own role in it."

Conservative lawyers last week said they would sue the Liberals for articles on the party Web site with headlines "Harper Knew of Conservative Bribery" and "Harper Must Come Clean About Allegations of Conservative Bribery, Liberals Say."

Dion said the party was confident it had done nothing wrong on the issue. "We'll not apologize -- come on!" he said in response to a reporter's question. "We want the truth from the prime minister."

The case centers on attempts in 2005 to persuade independent Member of Parliament Chuck Cadman to vote with opposition parties to defeat the Liberals, who had a minority government.

Cadman, who died of cancer soon afterward, ended up voting for the Liberals. But the Liberals allege that Conservative officials tried to bribe Cadman, with Harper's knowledge, even though they say Harper knew this was immoral and criminal.

The Conservatives say they had tried to get Cadman to rejoin the Conservative Party and had promised to help him win reelection. The Liberals have asked the police to investigate assertions by Cadman's widow that the Conservatives offered him a C$1 million ($1 million) life insurance policy. The Conservatives deny the insurance offer.

($1=$0.98 Canadian) (Reporting by Randall Palmer; Editing by Janet Guttsman)