Canada has been thrown into a period of intense political volatility as the three opposition parties in Parliament have rejected the governing ultra-right Conservative Party’s “mini-budget” response to September’s economic meltdown, and announced the formation of a coalition government ready to take power. Parliament is now suspended until January.

The crisis was sparked by the government’s fiscal update, on November 27, just a few days after Parliament reconvened from a Federal election where Steven Harper’s Conservatives were returned to power again holding a minority of the seats in Parliament.

Harper’s previous term was marked by a close affiliation with the Bush regime on most issues such as foreign policy, energy and democratic rights. Since their election in 2006, the Conservatives have accelerated the previous neo-liberal policies of the Liberals, implementing an agenda of privatization, cutbacks, deregulation, and militarization, and extending Canada’s involvement in the war in Afghanistan.

Canada has also seen record job losses with hundreds of thousands lay-offs in forestry and manufacturing. 70,000 jobs were lost in November alone.

Far from trying to remedy the situation, the Conservative’s called for a continuation of neo-liberal policies in their fiscal update, which did not included a significant ‘bail-out’ package for the economy, and instead severely constricted public servants right to strike and limited their pay, privatized public assets, attacked pay equity, and canceled the Party Financing Act, upon which the opposition parties largely depend for funding.

The mini-budget has been widely condemned by labor and progressives. “How does taking away public employee’s right to strike stimulate the economy?” asked Ken Georgetti, president of the Canadian Labour Congress. Hours after the budget statement, the opposition parties made a surprise announcement that they would bring down the government and form a coalition.

Under Canada’s Parliamentary system, any party (or coalition) that can obtain the confidence of the house – through a majority vote on a “confidence motion” such as a budget bill – can ask the Governor General as the Queen’s representative to form a government. A coalition government at the Federal level is very unusual in Canadian Parliamentary history.

The proposed coalition would bring together the right-of-centre Liberals and the smaller centre-left New Democratic Party. The NDP would hold six ministerial seats within a twenty-four member cabinet. The coalition would not include the Bloc Québécois, which advocates for the sovereignty of Quebec people, but will receive their support on confidence motions for eighteen months.

The formation of a coalition has been enthusiastically welcomed by labor and progressive movements as a vehicle to remove the ultra-right Conservatives. Although there has been wide-spread debate on the left about the social democratic NDP partnering with the big business Liberals, tens of thousands of Canadians rallied in major cities in support of the coalition this past week.

In what is widely regarded as a desperate bid for power, the Conservatives have now dropped most points of their financial update and successfully asked the Governor General to suspend parliament until January, when they will put forward a new budget. They have also launched a desperate public-relations war.

Harper’s efforts have included buying TV ads, trying to shift public opinion with scare-tactics claiming that the coalition is anti-democratic, and by red-baiting the NDP as socialists (rather ridiculously since that party dropped its socialist “baggage” twenty years ago).

Disturbingly, the Conservative’s have also launched one of the most hostile attacks on the Québécois in recent years, characterizing the coalition as dealing with dangerous “separatists” in a negative appeal to the some of the worst sentiments of English-speaking Canada.

Harper’s attack has been seen as an affront by the Quebec people, who have long-standing grievances around the Canadian government’s failure to recognize their national status and right to self-determination. Even Quebec’s right-wing Liberal premier has criticized the Conservative’s comments as inflammatory. During the last election the Conservatives Party was most noticeably set-back in Quebec. Support for the coalition is also strongest there.

It remains to be seen whether the coalition will hold together, however, over the holidays. This week the largest party in the coalition, the Liberals, suddenly dumped their unpopular leader Stephan Dion, forcing his resignation on Monday. The Liberals are posed to replace him with right-wing and hawkish Micheal Ignatieff, as the other main contenders withdrew from the race the next day. Ignatieff is luke-warm about the coalition.

Either way, as Canadian journalist Naomi Klein said in a recent interview, “January [could see] a deeply chastened Harper… Best case scenario, we leverage his overreach, his attempt to use a crisis to push through his ideological pro-corporate agenda, to have a deeper democracy in our country.”

Any coalition government “would be highly susceptible to public pressure, and would open new doors to win pro-people policies” the Communist Party of Canada said in a recent statement, adding that “labour, Aboriginal peoples, youth and students, women, and other people’s movements and organizations will need to intensify extra-parliamentary mobilizations to demand real and immediate action from any new government.”

If Harper is not replaced in January, it seems likely the movement for the Conservative’s defeat will grow rapidly in a spring that now holds new possibilities.