Canada to hold election overshadowed by crisis

By David Ljunggren

OTTAWA, Oct 13 (Reuters) - Canada's ruling Conservatives look set to retain power on Tuesday in the first national election held in a major industrialized nation since the market meltdown this month.

Prime Minister Stephen Harper triggered the campaign five weeks ago on the grounds that his minority government could no longer work with opposition parties who hold the balance of power in Parliament.

Then shares began to plummet and Harper retooled his campaign in a bid to persuade Canadians that only he could manage the country in such troubled times.

"At this crucial moment for our economy we need a realistic and credible plan to protect our jobs, our savings and our future," he said at a weekend rally, dismissing opposition calls for major government spending programs.

The election is the third in four years and -- according to virtually every poll over the last month -- will produce Canada's third successive minority government.

Harper, who defeated a minority Liberal administration in January 2006, foresees another election relatively soon.

"Obviously the Parliament won't last four years," he told CTV television on Sunday.

The Liberals were hampered this campaign by the ineffective performance of leader Stephane Dion and his insistence that despite tumbling markets and fears of a recession, the party would impose a carbon tax designed to cut greenhouse gases.

Harper says the tax would trigger an immediate recession "as bad as anywhere in the world." Dion says this is nonsense.

"Stephen Harper built his campaign on a lie. He must lose on this lie," he said on Sunday.

Harper is promising to keep taxes and inflation low while maintaining balanced budgets.

"It's the leadership and the plan we need for tough economic times," said Edgar Maghilom, a voter who works at the University of Guelph in Ontario.

"This is the wrong time to tax people. We need a steady hand and good government," he said.

Harper's campaign was by no means smooth. After assuring Canadians all would be well if they waited out the crisis, he suddenly announced measures to stabilize the economy.

Opponents said the prime minister -- a reserved figure -- did not appreciate that ordinary Canadians were worried.

"I understand those concerns. But I also understand that it is my responsibility as Prime Minister not to panic," he said.

The Conservatives had high hopes of winning a majority of the 308 seats in Parliament, in large part by picking up more support in the powerful French-speaking province of Quebec.

But their campaign there stumbled badly, making it almost certain they can only hope for another minority.

"If I get two mandates in a row, two minority mandates, I will be very thankful," Harper told CTV.

The Liberals' fate depends on how much of their support leaks to the left-leaning New Democrats and the Green Party.

Polls show the New Democrats close to the Liberals but not all analysts are sure this will be reflected in the result.

"The systemic (financial) problems will lead people to go to one of the two main established parties. People will have less willingness to experiment," said Allan Tupper, a professor of political science at the University of British Columbia.

The Conservatives hold 127 seats in Parliament while the Liberals have 95.

Dion, whose first language is French, has trouble communicating in English and polls suggest the Liberals are on their way to their worst performance since 1984, when they captured just 40 seats in Parliament. (Editing by Doina Chiacu)