Canada's opposition leader quits

Stephane Dion lost favour with the Liberals after losing October's election

The leader of Canada's main opposition Liberal Party, Stephane Dion, has announced he will resign early, as soon as the party finds a new leader.

An interim leader is expected to be chosen on Wednesday, until a party convention in May.

Deputy leader Michael Ignatieff is widely tipped to replace Mr Dion.

His announcement follows the failure of an opposition coalition to topple the Conservative government of Prime Minister Stephen Harper last week.

The Liberals and New Democratic Party (NDP), with the support of the separatist Bloc Quebecois, had agreed to vote together to overthrow the government in a confidence vote scheduled for 8 December, and form a coalition government.

In an unprecedented move, Mr Harper avoided the vote by asking the governor general to suspend Parliament until late January, when the government will present a budget.

'New circumstances'

Mr Dion lost favour with his party after the Conservatives were re-elected with a strengthened minority in October.

"There is a sense in the party, and certainly in the caucus, that given these new circumstances the new leader needs to be in place before the House resumes" on 26 January, Mr Dion said.

Michael Ignatieff (L) is favoured over Bob Rae as interim leader

NDP leader Jack Layton and Bloc Quebecois leader Gilles Duceppe said they still supported the idea of a Liberal-NDP coalition.

Mr Ignatieff has been lukewarm to the prospect of a coalition, describing his position on Sunday as a "coalition, if necessary, but not necessarily a coalition".

He said Mr Harper could avoid being overthrown in January if he presented a budget in the national interest.

Mr Ignatieff's only rival for the interim leadership of the Liberal Party is MP Bob Rae, who favours a coalition to bring down Mr Harper.

Should the opposition parties stick to their plan to vote against the Conservative government when it presents its budget on 27 January, Canadians will be faced with either another general election, or a Liberal-NDP coalition government.

Opinion polls indicate voters are against the coalition.