April 29, 2011 / 10:47 PM / in 7 years

Election comment has NDP scrambling

KAMLOOPS/MONTREAL (Reuters) - New Democratic Party Leader Jack Layton, whose party has turned the election campaign on its head, scrambled on Friday to put out a brush fire about the country’s central bank.

Layton said he fully respected the independence of the Bank of Canada, a day after he appeared to challenge that by telling Reuters the Canadian economy was too fragile to weather higher interest rates -- perhaps his first gaffe of the campaign.

“We have a long-standing institutional arrangement here with the Bank of Canada dealing with monetary policy at arms-length from the government. That’s the way it should be,” Layton told a news conference in Kamloops, British Columbia.

The Conservatives, who are leading in the polls, and the third-place Liberals pounced on Layton’s comments as evidence that the New Democrats were not ready for political power.

Conservative Finance Minister Jim Flaherty called it “shooting from the lip”, and the Liberals said the NDP was challenging Canada’s commitment to low inflation.

Canadian politicians rarely comment on interest rates, because the central bank is supposed to be independent.

The New Democrats have been under the political microscope since they stunned observers by jumping into second place in opinion polls, well ahead of the Liberals, whose support was dropping to historic lows.

If the Conservatives can’t form a government, and if the NDP wins the second largest number of seats, Layton could have a chance of forming a minority government.

Alternatively, the NDP and the Liberals could split the center-left vote in the seat-rich province of Ontario, allowing the Conservatives to put in a strong performance that could bring a strong minority, or even a weak majority.

Whether they win a majority or minority could depend on voter turnout, according to the research commentary on an Ipsos Reid poll released on Friday for Global Television and Postmedia News.

The Conservatives have ruled with two successive minority governments since 2006, requiring the support of at least one opposition party to remain in power.

Prime Minister Stephen Harper, speaking in Montreal, said he will look to form a third Conservative minority government if he’s denied a majority in Monday’s election. But he signaled little willingness to compromise.

Harper has argued throughout the campaign that the Conservatives need a majority of the 308 seats in the House of Commons to guarantee economic stability.

Friday’s remarks continued a sometimes mixed message from Harper as his campaign switched from attacking the Conservatives’ traditional rivals, the Liberals, to fighting the NDP, which usually trails in a distant third.

Harper said on Thursday that a government led by the New Democrats could scare away foreign investors. But he gave no such warning in his Montreal appearance. By Friday afternoon he called the NDP the “standard bearer” of the opposition.

Investors seem to be taking the political surprises in stride.

“Our base-case expectation is that there will be no major ideological shift in the political landscape and that the market will return its attention to second-half hikes by the Bank of Canada and continued economic growth on Tuesday,” David Tulk of TD Securities said in a note on Friday.

The NDP has benefited from voter disenchantment with the other two main national parties, as well as Layton’s strong performance in two leadership debates.

Their strongest gains have come at the expense of the Bloc Quebecois, which shares similar economic policies but favors independence for the French-speaking province of Quebec.

But the NDP usually fades late in election campaigns, losing votes to the Liberals. They may face obstacles in converting polling support into votes on Monday, especially in districts where they don’t have a strong pool of volunteers.

With reporting by Randall Palmer, Louise Egan and David Ljunggren; editing by Rob Wilson and Janet Guttsman

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