Bonds News

UPDATE 2-Canada Liberal leader Dion will resign early

(Adds polling, Rae reaction, paragraphs 5, 17-20)

OTTAWA, Dec 8 (Reuters) - Canada’s Stephane Dion, who in October led the Liberals to their worst election showing since the 1800s, said on Monday said he would step down as his party’s leader as soon as it picked his successor .

That could come as early as Wednesday when the Liberal caucus in Parliament plans to meet. The front-runner is former Harvard don Michael Ignatieff, a legislator who heads the right wing of the Liberals, the official opposition party. Polls show the Liberals would do better under him than under Dion.

Soon after the party’s poor performance in the Oct. 14 general election, Dion said he would turn over the reins to the winner of a leadership convention in May. But the Liberals last week were jolted by the realization they may have to face a new election before then -- with Dion still serving as leader.

On Monday, under mounting pressure from the Liberal caucus in Parliament, Dion announced he would step down early, saying he agreed that a new leader needed to be in place before the House of Commons resumes on Jan. 26.

The Conservatives plan to present their budget the next day, setting up a possible vote of no confidence should the Liberals decide to stick with a plan to team up with the two other opposition parties to topple the government.

“As always, I want to do what is best for my country and my party, especially when Canadians’ jobs and pensions are at risk,” he said in a statement after a flurry of calls and meetings.

“So I have decided to step aside as leader of the Liberal Party effective as soon as my successor is duly chosen.”

Dion remains unpopular with Canadians, and the party’s fate was made more tenuous by the coalition deal Dion helped engineer with the left-leaning New Democratic Party (NDP) and the separatist Bloc Quebecois.

The deal, signed last week, was designed to remove the minority Conservative government of Prime Minister Stephen Harper and replace it with a Liberal-NDP government. Harper’s party has the most seats in Parliament but his government still needs the tacit support of at least one opposition party to survive.

Harper forestalled any immediate defeat by getting Parliament suspended until Jan. 26, and the opposition’s maneuvering has generated a wave of public support for the prime minister. If an election were held now, he could win a majority mandate, polls suggest.

As a consequence, the Liberals will probably ditch their plan to defeat the government in late January or early February. Even so, party elders have decided they need to start preparing as soon as possible for either a surprise election or rebuilding the party.

“I think the pressure was just too much in the last few days, and I respect his decision,” Bryon Wilfert, Dion’s closest confidant in Parliament, told CBC television. “I regret it but I understand it.”

Ignatieff is the leading Liberal advocate for restraint in deciding whether to topple Harper, in contrast with Bob Rae, his rival in the leadership contest. Rae says the coalition should go ahead and bring Harper down at the first opportunity.

“My position can be summarized as coalition if necessary but not necessarily coalition,” Ignatieff told CTV on Sunday.

“My view of this is that Canadians would not understand a party that said we’re not even prepared to look at the (Jan. 27) budget ... and we already know how we’re going to vote.”

Liberal spokesman Daniel Lauzon said that if a leader resigns before a leadership convention, the party’s national executive would choose an interim leader “in consultation with” the Liberal caucus in Parliament.

Another leadership candidate, Dominic LeBlanc, pulled out on Monday afternoon and backed Ignatieff, calling for a choice to be made by the end of the month.

Rae, a former Ontario premier who is on the party’s left, said nobody should be chosen this week and called for public debates with Ignatieff.

“It’s better to have the party as a whole involved in finding a solution than it is to have a solution imposed from above,” he told a news conference in Toronto. (Editing by Frank McGurty)