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OTTAWA (Reuters) - Canada's opposition Liberals lent key backing to the ruling Conservatives on Wednesday, staving off an early election and killing an opposition coalition that had sought to replace the minority government.
The cash-strapped Liberals announced they would back the Conservatives' 2009 budget and economic stimulus plan if the government agreed to an amendment requiring it to report to Parliament on the progress of its budget initiatives, an idea the Conservatives readily accepted.
"I'm very pleased to state that the government will be supporting the Liberal amendment to the budget. We're very pleased as well that the Liberals have decided to support our budget. We look forward to working co-operatively with them," Conservative House leader Jay Hill told reporters.
The Conservatives, led by Prime Minister Stephen Harper, were just reelected last October but then came within a whisker of being toppled in Parliament by the three opposition parties, which agreed in December to bring down the government and seek to install a coalition government.
By Wednesday, that plan had disintegrated into acrimony after the Liberals gave conditional backing to the budget.
"The coalition is dead, it's finished, it's over," said Gilles Duceppe, leader of the separatist Bloc Quebecois, one of the parties that had signed the agreement.
The coalition idea had proved unpopular with the electorate and the Liberals appeared unwilling to risk the alternative, a fourth election in five years, if they brought down the government so soon after the October 14 vote.
"Canadians don't want another election, and they're tired of political games," the new Liberal leader, Michael Ignatieff, told a news conference. He said the deficit-laden budget, released on Tuesday, responded to the needs of the present.
"What (Canadians) want from me is political action that shows a sense of responsibility and I'm trying to do that."
He presented an amendment to the main budget motion requiring the government to report back on the budget implementation in March, June and December.
"We are putting this government on probation," Ignatieff said. "Each of these reports will be an opportunity to withdraw our confidence should the government fail Canadians "
He later reiterated to the House of Commons his readiness to bring the government down if necessary.
"The motion that we've put forward today holds this government on a very tight leash. If it fails to live up to its commitments, it will be defeated," he said.
Ignatieff said the planned C$85 billion ($70 billion) in deficits over five years that were announced in the budget had come right up against the limit of what was tolerable, and he wanted to avoid using his amendment to ask for even more spending. The financial plan includes a two-year C$40 billion stimulus package.
Many analysts expect Canada will now not now face an election before the autumn or even next year.
The Canadian dollar held near a two-week high at around C$1.2091 to the U.S. dollar, or 82.71 U.S. cents after the Liberal announcement, before slipping to C$1.2130 on unrelated news by the U.S. Federal Reserve.
New Democratic Party leader Jack Layton bitterly criticized Ignatieff for what he said was the creation of a new coalition -- one with Harper.
"Far from holding (Harper's) feet to the fire, he's given him a 'get out of jail' card for free," Layton said.
Ignatieff rejected the charge. "No alliance exists with this government," he told the House.
Yet he will now be in the tricky position of having to justify, every time there is a confidence vote in Parliament, why he, as leader of the official opposition, is keeping the government in power.
Stephane Dion, the man Ignatieff replaced last month as the head of the Liberal Party, had argued that the party should not automatically have to vote against the government but that drew ridicule from his opponents for propping up the Conservatives too often.
"Mr. Ignatieff has decided to follow in the footsteps of Mr. Dion," the New Democrats' Layton scoffed.
Additional reporting David Ljunggren and Louise Egan; editing by Peter Galloway