RICHMOND, British Columbia (Reuters) - Prime Minister Stephen Harper, battered over his response to the worldwide financial crisis, acknowledged on Thursday he could lose the October 14 election that he had seemed set to win handily only two weeks ago.
Until the global problems struck, polls showed the governing Conservatives would retain power and stood a good chance of turning their parliamentary minority into a majority.
As the crisis struck home and Canadians saw their stock portfolios take a beating, Harper initially said they should not panic. Opposition parties said this showed he was out of touch with voters' concerns and the Conservatives started to slide in the polls.
"I've said from the outset that I believe this is a close election that can go any way ... we were behind in the polls two weeks before this election began," a somewhat subdued Harper told supporters at a rally in British Columbia.
Polls show the Conservatives between 4 and 11 percentage points ahead of the official opposition Liberals. The Conservative lead has grown a little in the past couple days but it is a much tighter race than earlier in the campaign.
Liberal leader Stephane Dion, a man the Conservatives have long mocked as being too weak to be a leader, is proposing a carbon tax to cut greenhouse gas emissions. Harper says the tax will trigger a recession.
"There will be one of two outcomes. There will either be Prime Minister Dion who will tackle our economic problems by increasing spending that we can't afford and increasing taxes to pay for it," said Harper.
"Or (there will be) our government which will keep spending under control and keep taxes going down ... Do Canadians want, at a time of economic trouble, to take economic policies which common sense tells us will drive us into recession?"
For the first time, Harper appeared to refer to calls from some opposition figures for Canadians to vote strategically to defeat him. Green Party leader Elizabeth May says she wants to see a minority Liberal government.
"If you get Prime Minister Dion, either directly or by the opposition parties helping him take power ... interest rates will be going up," Harper said.
Dion says the costs of the carbon tax plan would be offset by cuts to personal and business income taxes.
In Halifax, Dion was asked to comment on the fact that Harper had referred three times to the possibility of a Prime Minister Dion.
"It's because I think he realized -- " Dion said before interrupting himself. "I will agree with him on something: there's a choice between him and me as prime minister, and I call on all Canadians that don't want Stephen Harper to vote for me."
He also fended off repeated questions about whether he backed comments by his deputies, reported in the media, that the carbon tax plan would be delayed or reduced to lessen the effect on the economy. Dion said his plan would stimulate the economy rather than harm it.
Additional reporting by Randall Palmer; Editing by Peter Galloway