Canadian PM sacks rival

Chretien's refusal to stand down caused tension in his party

Canadian Prime Minister Jean Chretien has reshuffled his cabinet, replacing a rival for the leadership, veteran Finance Minister Paul Martin, with Deputy Prime Minister John Manley.

Unfortunately, matters unrelated to governing have gotten in the way of our working together

Jean Chretien

The BBC's Mike Fox in Montreal says tensions between the two men have been mounting in recent weeks, after it became apparent that Mr Chretien had no intention of standing down for another three years at least.

Mr Martin, who is widely respected by the financial markets, had started putting together his own campaign team to replace Mr Chretien as leader of the Liberal Party.

The reshuffle comes as the government is becoming mired in a series of financial scandals - the party's worst political crisis since the Quebec referendum on independence in 1995, our correspondent says.

Mr Manley, who is 52, was sworn in at a hastily-arranged ceremony. He will retain his job as Mr Chretien's deputy.

Like his predecessor, he is on the conservative side of the governing Liberal Party, has a reputation for competence and is considered by many as a safe pair of hands.

'Bitter rivals'

Announcing Mr Martin's departure, the Canadian prime minister said his rival had been part of a formidable partnership that had led the party to three consecutive election victories since 1993 and had turned round the economy.

Correspondents believe Mr Martin (right) will launch a challenge next year

"It is with sadness that I confirm you are leaving the cabinet. Your contribution as Minister of Finance will be a continuing source of pride for you and me."

"But, unfortunately, matters unrelated to governing have gotten in the way of our working together on government policy."

Mr Chretien denied that he had sacked Mr Martin, saying that the two men had "mutually agreed" that he should leave - something Mr Martin disputes.

Our correspondent says it is an open secret that the two men have been bitter personal and political rivals since Mr Martin missed out in an earlier challenge for the top job.

Only a week ago, Mr Chretien dismissed his controversial Defence Minister Art Eggleton, and demoted another minister amid accusations of cronyism and corruption.

Scandals

Several other ministers have also been running unofficial leadership campaigns after Mr Chretien hinted that he would be stepping down soon.

Manley, a former tax lawyer, has risen fast in the Liberal Party

But last week he announced that he had to end the uncertainty and unite the party.

Mr Martin saw this as a challenge and said publicly that he had considered resigning.

But at a news conference after the sacking, he refused to comment on any possible leadership challenge and said he supported the government.

He also called on the financial markets to respect the fundamental strength of the Canadian economy, and praised his replacement, Mr Manley.

Party intrigues

Mr Chretien will now face the regular leadership review in February.

Correspondents say Mr Martin is almost certain to use that opportunity to challenge for the leadership of both party and the country.

Mr Chretien said it seemed strange to be having a review as he received a big mandate from the Canadian people only 18 months ago.

But there are growing question marks over his leadership style.

Many of Mr Martin's supporters criticise what they see as the short term planning and lack of direction in Canadian government policy.