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OTTAWA (Reuters) - Canadian Prime Minister Stephen Harper is bullish about his chances if there's a federal election next year, and says the government has done what it can to cope with challenges to the economy in 2008.
In a wide-ranging year-end interview with Reuters, Harper insisted the government would not wreck Canada's record of 10 successive years of budget surpluses, even though the economy, threatened by a strong Canadian dollar and the as-yet unknown fallout from the U.S. subprime crisis, will face challenges.
Sitting before a large Nova Scotia Christmas tree at his official 24 Sussex Drive residence in Ottawa, he said he was confident his Conservatives would win the next federal election, whenever it is held, even if the economy is souring by then.
"I think (our chances) are good ... our approach has been let's just govern as well as we can and let the public make the decision when the time comes."
He won a minority government in January 2006 and his government can be brought down if the three opposition parties unite to defeat the Conservatives in Parliament.
Harper also gave unusually explicit guidance on the government's view on the Canadian dollar, saying it was clearly overvalued when it hit US$1.10 (valuing a U.S. dollar at about 91 Canadian cents) in November, but that it would be appropriately valued just shy of parity with the U.S. dollar.
Harper said the government has positioned itself well for a possible rough patch in the economy next year by introducing tax cuts in October, particularly to help the manufacturing sector.
"But that said, it's hard for me to imagine how this uncertainty can continue without some effect on the Canadian economy. So I think we're going into a more challenging year economically."
He said the government would not have any major new spending initiatives and would continue to pay down the federal debt, which he said was appropriate in times of uncertainty.
Opposition Liberals are increasingly talking of defeating the government early next year, possibly even making an attempt before the Conservatives can present their third budget.
Most polls this year have shown the Conservatives ahead of the Liberals but short of the 40 percent public support seen as likely to give them a majority in Parliament.
"If the opposition does bring us I down, I promise you we will be more ready for that election than they will," Harper said. The interview took place on Tuesday but was embargoed until Thursday at the request of his office.
"Even if the economy proves to be slower than we hope, the question will still be: who do you really trust to lead the country through any kind of economic or other difficulty?"
Conservative insiders say their election campaign will highlight what they say are the poor leadership skills of Liberal boss Stephane Dion. Polls show Canadians prefer Harper's leadership skills to those of Dion by a large margin.
"None of our opponents, for all their sabre-rattling, have been rushing to this election," Harper said, noting that the government had managed to push key measures through Parliament despite its minority status.
The Conservatives are promising to cut down crime, boost Canada's sovereignty in the Arctic, increase Canada's international role and cut down on greenhouse gas emissions.
"It's a peculiar Parliament. No party has been supporting us, every party says we should be thrown out and yet we continue to govern," Harper said.
Editing by Peter Galloway