Quebec separatists concede slim victory to hit economic plans

MONTREAL/OTTAWA (Reuters) - Quebec separatists got ready for a new stint in power on Wednesday, but acknowledged that a surprisingly narrow victory in Tuesday's provincial election would hit their economic plans, in particular a vow to boost royalty rates on mining firms.

Pauline Marois led the left-leaning Parti Quebecois (PQ) to victory, but the party captured only 54 of the 125 seats in the legislature of the predominantly French-speaking Canadian province.

That means the PQ will need support of politicians from the two main opposition parties to stay in power. The PQ's ultimate aim is to win a referendum on breaking away from Canada, but that will not happen as long as the party has only a minority of seats in the legislature.

Marois, who has already said she will focus on the economy for now, campaigned on promises to raise personal taxes and boost royalties and taxes on mining firms.

"I want to increase the royalties on the natural resources and the two other parties said they disagree with that," she told a news conference in Montreal.

Previous PQ governments held referendums in 1980 and 1995 on whether to break away from Canada and both failed. The party won just 31.9 percent of the vote on Tuesday, showing that enthusiasm for the idea of independence is muted at best.

The incumbent Liberals won 50 seats. The right-of-center Coalition for the Future of Quebec (CAQ) ended with 19 seats.

The PQ's win, which ended nine years in opposition, was marred by a fatal shooting in the Montreal venue where Marois was giving her victory speech. Police have one man in custody and could give no motive for the shooting.

TAKEOVERS TOUGHER

Shares in home improvement store Rona Inc fell as the PQ victory appeared to lower the chance of a possible takeover by U.S. rival Lowe's Cos.

But investors were mostly sanguine and the gap between Canadian and Quebec government bond yields narrowed slightly, an indication that investors were demanding less of a risk premium.

"This is the perfect outcome," said John Goldsmith, vice president of Canadian equities at Montrusco Bolton in Toronto.

"The best outcome was that it would be a PQ minority government, which means the intentions of the PQ to push ahead with increasing royalty rates on mining companies and increasing taxes, those are not going to get pushed through."

CAQ leader Francois Legault said he was prepared to back PQ initiatives on combating corruption and protecting the environment. He was less categorical about the economy, although he did praise the PQ's plans to clamp down on foreign takeovers.

Marois, who also vowed to press ahead with a new law to strengthen the use of French and to cancel planned student tuition hikes that generated street protests earlier this year, struck a conciliatory tone.

"I will present my project(s), we will have discussions, and I will adopt what it is possible for me to adopt," she said.

"We have the responsibility to serve the people of Quebec and I will do that with my colleagues of the opposition."

SHORT LIFE SPAN

Minority governments tend to have relatively short life spans in Canada, but Marois seemed in no immediate danger.

Liberal leader and Quebec Premier Jean Charest lost his own seat in the election and said he would step down as party leader.

Antonia Maioni, director of the Institute for the Study of Canada at Montreal's McGill University, said the first real test for the PQ government will be its inaugural budget. Quebec budgets are traditionally delivered in March.

"The budget is going to be interesting because that's where the dividing line is between Marois and the two opposition parties on a lot of those economic issues," she said.

Guy Laforest, a political scientist at Laval University in Quebec City, said he expects Marois - who became a PQ legislator in 1981 and took part in three leadership races - to be cautious.

"She will be reasonably prudent managing the Quebec state and Quebec society, and I think it very unlikely that she will dare (to introduce) bold legislative measures either this fall or next spring," he said.

"This is a calm, collected person. She will like to govern. She will like the job, and she will not do foolish things to risk everything upon first notice."

The PQ victory was marred by a fatal shooting in the Montreal theater where Marois gave her victory speech. The gunman appeared to make comments suggesting he was defending the rights of the province's minority English-speaking community.

French speakers make up about 80 percent of Quebec's 7.8 million population.

(Additional reporting by Randall Palmer and Louise Egan in Ottawa and Euan Rocha in Toronto; Editing by Janet Guttsman)

Source: http://news.yahoo.com/quebec-separatists-win-minority-government-tv-networks-022440848.html

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