I don't think this is as bad a move for the coalition parties as many here seem to think.
First off, the Conservative proposals (particularly with respect to those proposals they've already retracted) smack of just the kind of controlling neo-con arrogance that Canadians have feared and which kept them from a majority in the last election. The simple fact is that Canadians roundly rejected every party other than the Conservatives last election, and they still couldn't get a majority because most Canadians still don't trust them. Their early proposals (especially cutting back federal funding which they knew would most detrimentally affect the other parties) merely confirmed to many Canadians exactly what they already suspected: Harper would govern in an arrogant, dictating, non-collaborative manner if he had the mandate to do so.
Secondly, the move is a sign of exactly what the Liberals lacked in the last election: strength. Dion was rightly criticized for lacking leadership and appearing, well, wussy. The Liberals don't look so wussy now, and with a new leader could be a lot more appealing come the next election.
Third, collaboration between the Liberals and NDP may bring some of the more leftist thinkers in from the cold, and encourage the two parties to collaborate in the future even after the coalition outlives its usefulness.
And this is not a coup d'etat - it's exactly how our democracy was designed to work. Personally, having forced Harper's hand on key issues I think the coalition would be wise to let the government stay in power under the threat of a non-confidence vote, something which would allow the Liberals time to re-establish themselves under new leadership and form a more viable opposition for the next election.
I think forecasts of (a) an election, and (b) a conservative majority as a result of such an election are very, very premature.
What's certain though is that this is going to be very, very, interesting.
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