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OTTAWA (Reuters) - The leader of Canada's main opposition party said on Tuesday he is trying to cool tempers ahead of next week's federal budget but made it clear he is prepared to topple the minority Conservative government over the budget if necessary.
Liberal Party chief Michael Ignatieff also signaled he would abandon the unpopular policy of introducing a carbon tax. That idea helped push the Liberals to one of their worst ever performances in a federal election last October.
The government will unveil its budget on Jan 27 and needs the support of the Liberals to pass it. The two other opposition parties have already made clear they will vote against it.
The three opposition parties signed a deal on Dec 1 last year to bring down Prime Minister Stephen Harper's government, triggering a major constitutional crisis that ended only when Harper had Parliament suspended.
Ignatieff took over as Liberal leader on December 10 and since then has toned down his party's combative line, stressing Canadians want action on the financial crisis. Harper has also sounded more conciliatory of late.
"I believe -- and I think the country has responded well to this -- that we needed to lower the temperature, we just needed to calm down. Canadians were really angry before Christmas," Ignatieff told Reuters in an interview in his residence.
"You can't make good judgments when you're angry. I've just tried to tone it down and if the prime minister is doing that, he's picking up the same signals I am."
The two men met on Monday for what Ignatieff said was a businesslike meeting on the budget, which Harper promises will contain major stimulus measures. One recent media report cited officials as saying the budget deficit next fiscal year could be as much as C$40 billion ($32 billion).
"I left him in no doubt, as I've done before, that I will vote the budget down if it doesn't meet the needs of the country," said Ignatieff, who wants measures to help the most vulnerable as well as preserving jobs.
Canada has run budget surpluses for more than a decade and Ignatieff said going into the red could pose big dangers.
"What are the risks that this is going to land us in a structural deficit that will take years and years and years for us to get out of?" he said, while also clearly indicating that a big deficit would not necessarily be a deal-breaker.
"No Canadian in their right mind I think is comfortable with a C$40 billion deficit ... if we have to go there we have to go there because the economy needs stimulation," he added.
Harper says the budget will include tax cuts. Ignatieff said these should be targeted at the most vulnerable.
"If you have very widely targeted tax measures you run a very substantial risk of torquing up your deficit into something structural," he said.
As part of the deal to bring down Harper last month, the Liberals signed a coalition deal with the minority New Democrats. The two proposed to govern with the support of the separatist Bloc Quebecois, an idea that proved highly unpopular with many Canadians and boosted Harper's poll numbers.
Ignatieff, who now rarely talks about the coalition in public, said the agreement focused Harper's mind on the need to govern responsibly.
"There's a good chance we will have a substantially better budget as a result," he said. Although the Liberal Party has cash woes and is beset with internal problems, Ignatieff said it would be ready to fight an election campaign if necessary.
The Liberals' effective abandonment of a carbon tax, a measure designed to fight global warming by discouraging carbon emissions, removes what was a major political headache for the party.
"I think a carbon tax has a lot of problems, which we discovered. We took it to the marketplace of Canadian politics, and the Canadian electorate said, 'We want to do the right thing environmentally but this isn't working for us, think again'," Ignatieff said.
Reporting by David Ljunggren; editing by Peter Galloway