Dec. 4 (Bloomberg) -- Canadian Prime Minister Stephen Harper suspended the country’s legislature for more than seven weeks in a bid to stave off a challenge from opposition parties seeking to bring down his government.

Harper, re-elected in October, said Governor General Michaelle Jean, who acts as the country’s head of state, agreed to his request to close Parliament until Jan. 26. The government’s first order of business will be a budget scheduled for Jan. 27, Harper said, calling on the opposition to work with his administration on a “stimulus” package for the ailing economy.

“The opposition criticism is ‘we have to focus on the economy immediately’ and today’s decision will give us an opportunity to focus on the economy,” Harper told reporters outside the governor general’s residence in Ottawa today. “It is critical for the three parties to work together on the decisions that need to be made with respect to the budget.”

The main opposition Liberals agreed Dec. 1 to form a coalition with the New Democratic Party in a bid to accelerate a stimulus package for the economy and oust the Harper government. The separatist Bloc Quebecois wouldn’t be part of the government though agreed to help it pass any legislation deemed matters of confidence. All three opposition leaders say they’re still committed to defeating Harper when Parliament resumes.

Currency, Stocks

The Canadian dollar fell the most in two weeks today and stocks fell on the political moves and a drop in the price of crude oil, a key export. The currency fell as much as 2.2 percent to C$1.2802 per U.S. dollar, and traded for C$1.2771 at 4:39 p.m. in Toronto. The Standard & Poor’s/TSX Composite Index slipped 239.14, or 2.9 percent, to 8,057.82.

“The prime minister has decided to put the locks on the doors of the House of Commons,” NDP Leader Jack Layton told reporters in Ottawa after the decision. “We won’t give up on our objective.”

Harper refused to grant the opposition a vote in Parliament that would have brought down his government, instead asking Jean to let him suspend the legislature. The three opposition blocs combined hold a majority of seats in the House of Commons, Parliament’s lower house.

The procedural move was unprecedented, marking the first time a prime minister has requested the suspension of the legislature to avoid a so-called confidence vote. Parliament’s suspension comes less than three weeks after the session began.

‘Running Away’

“For the first time in the history of Canada, the prime minister of Canada is running away from the Parliament of Canada,” Stephane Dion, the 52-year-old Liberal leader who would head the coalition government, told reporters, adding he will “respect” the governor general’s decision.

Gilles Duceppe, leader of the Bloc Quebecois, told reporters the move was “immoral.”

The turmoil centers on how to manage Canada’s response to the global economic crisis. The political crisis was sparked Nov. 27 when Finance Minister Jim Flaherty presented a fiscal update that included cuts to funding for political parties, limited civil servants’ right to strike and failed to offer a stimulus package to spur economic growth. The three opposition parties said they would oppose the plan and banded together.

Gross domestic product in Canada will contract 1 percent in the fourth quarter and 0.4 percent in the first quarter of 2009, meeting the technical definition of a recession, according to government forecasts released last week.

More Seats

Harper’s Conservatives went into the Oct. 14 election with 127 seats in Parliament and increased their total to 143, still short of the 155 needed to control the legislative agenda. The government needs support of at least one other party to pass legislation.

Harper, prime minister for almost three years, has since backtracked on the political funding and labor rights. He and Jean met for about two hours this morning. Jean didn’t speak to reporters after the meeting.

The role of Jean, Queen Elizabeth II’s representative in Canada, is mostly ceremonial.

“Harper put the Governor General in a very difficult situation, there isn’t a lot of precedent,” Bradford Duplisea, a public health researcher from Gatineau, Quebec, said at a rally on Parliament Hill calling for the government to be defeated. A coalition “can’t do any worse,” he said.

To contact the reporters on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net; Greg Quinn in Ottawa at gquinn1@bloomberg.net.

Last Updated: December 4, 2008 16:43 EST