Montreal - In a stunning reversal of political fortunes, the leader of Canada's official opposition, Stephane Dion, was poised to become the country's next prime minister despite having lost the October 14 federal election.

Dion, who just six weeks ago was forced to step down as Liberal leader after the party's worst-ever electoral performance, emerged as the compromise candidate to lead a centre-left coalition formed Monday among the Liberal Party and the socialist New Democratic Party (NDP), aiming to unseat the minority Conservative government of Prime Minister Stephen Harper.

The government took office just two weeks ago, after Conservative gains in October 14 parliamentary elections. After the defeat, Dion resigned effective May 2, remaining as interim party leader to give the Liberals time to decide on a successor.

The two-party, centre-left government would hold an even smaller minority than the current government but would oust the Conservatives with support from the fourth party in Parliament, the separatist Bloc Quebecois, forging a ruling de facto majority.

If the fragile coalition holds long enough to take power - as early as next week or by the end of January, depending on Conservative parliamentary manoeuvres - Dion will become interim prime minister, to be replaced in May by the new Liberal leader.

The three candidates vying to replace Dion - Michael Ignatieff, Bob Rae and Dominic LeBlanc - are now fighting for a job that has grown from captaining a defeated Liberal Party to, potentially, governing Canada.

Meanwhile, the Bloc Quebecois, a party advocating the break-up of Canada and sovereignty for French-speaking province of Quebec, became the kingmaker with the power to put the opposition coalition over the top. Bloc leader Gilles Duceppe said Monday that his party will support the Liberal-New Democratic coalition but will not hold any portfolios.

Speaking Monday in the House of Commons, Harper blasted the opposition for putting forward a coalition "that can govern only with the veto of the people who want to break up this country."

"Do they really believe that is in the interests of this country?" he asked.

Ironically, Harper himself had attempted an alliance with the Bloc in 2004 to unseat the minority government of Liberal prime minister Paul Martin.

Dion, Duceppe and NDP leader Jack Layton signed the coalition government agreement Monday afternoon in Ottawa in front of reporters.

Harper precipitated the parliamentary confidence crisis last week with a provocative economic plan that provided no economic stimulus for Canada's slumping economy, cut government spending and, significantly, slashed public subsidies for political parties.

"We are going through an unprecedented economic crisis throughout the world," Dion said following the signing ceremony.

"In Canada, we're seeing a sad spectacle from Mr Harper's government, a flagrant lack of interest in the fate of citizens. Given the critical situation facing our fellow citizens and the refusal and inability of Harper government to deal with this critical situation, the opposition parties have decided that it is time now to take action."

The agreement stipulates that the coalition government will last until June 30, 2011. The Bloc Quebecois has agreed to support the coalition until at least June 2010. The cabinet will consist of 18 Liberal ministers and six NDP ministers.

The three parties agreed on an economic stimulus package that would include accelerated and new spending on infrastructure, home construction, home retrofits and support for the struggling auto and forestry sectors, Dion said.

"The focus of this government will be the economy," Layton said.

To enter the coalition, the NDP made two major concessions. It agreed to drop its demand for the immediate withdrawal of Canadian troops from Afghanistan and backed down from a demand to scrap a 50- billion-Canadian-dollar (40.2-billion-US-dollar) corporate tax break.

The coalition partners vowed to work with US president-elect Barak Obama on a North American cap-and-trade carbon programme.

Parliament is due to vote December 8 on a Liberal no-confidence motion. If Harper's government loses the vote, Dion would request that Governor General Michaelle Jean, the queen's representative in Canada, approve the plan to form a coalition government.

But Jean, who is currently on a state visit in Europe, could also decide to send Canadians to the polls for a second time in less than two months. Harper could also try to bid for more time by suspending the current session of Parliament until the budget vote, set for January 27, hoping that the fragile coalition will collapse. (dpa)