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We're not breaking the law: Harper 

[PoliticsWatch updated 5:00 p.m. June 11, 2007]

OTTAWA  — Fed up with allegations his government has broken a contract on offshore resources with the Atlantic provinces, Prime Minister Stephen Harper challenged Nova Scotia Monday to take the federal government to court. 

Harper made the comment a day after Nova Scotia Premier Rodney MacDonald announced his government was pulling out of talks with the federal government on the Atlantic accord and a new equalization formula in this year's federal budget. 

MacDonald, a Conservative premier, is also urging Tory MPs from Nova Scotia to vote against the federal budget implementation bill later this month at third and final reading and even suggesting senators delay its passage in the upper chamber.

Last week, a Nova Scotia Conservative MP, Bill Casey, was expelled from the party's caucus after he voted against the budget implementation bill at report stage. 

Casey said the federal government's new equalization formula contained in the budget effectively broke a contract with his province forcing him to vote against his own party after 15 years in the Commons. 

The use of the phrase "broken a contract" by the former car dealer Casey has helped in simplifying the complex equalization debate and appears to be creating a major political headache for Harper based on his comments Monday. 

"If you're really serious in the allegation that we've broken a contract then I think you have to follow up that allegation up with action," Harper told reporters during a joint press conference on Parliament Hill with Jan Peter Balkenende, the prime minister of the Netherlands.

"I don't think you can just make that allegation and walk away. That's a serious allegation -- the federal government is breaking the law. We're not breaking the law and if Nova Scotia believes that they will take the appropriate action."

Harper said the allegation of a broken contract was "without substance" because if the Nova Scotia government really believed it they would take the federal government to court. 

The prime minister even suggested the federal government could take its own legal action because "I don't think we can let that allegation stay out there forever."

"At some point we will consult tribunals ourselves if that's necessary to get a ruling on our respect for the contracts."

However, Premier MacDonald told reporters in Toronto that he is looking to settle the issue outside of court. 

"The most important court is the court of public opinion and I can tell you that in the court of public opinion in Nova Scotia the federal government has broken a deal," he said. 

MacDonald said the discussions with the federal government have not gone well and comments by Finance Minister Jim Flaherty in a letter to a newspaper over the weekend defending the federal government's position and discrediting criticism as an urban myth prompted him to pull out of talks. 

The premier's new open opposition to the federal government is now putting pressure on the two remaining Tory MPs from Nova Scotia -- Foreign Affairs Minister Peter MacKay and Tory MP Gerald Keddy

MacKay was in question period Monday but did not take questions on the controversy and did not speak with reporters when he left the chamber. 

Keddy, however, was talking more candidly than ever before. 

He told the Canadian Press that he was "shocked" at Flaherty's comments and was meeting with the prime minister immediately to discuss the situation. 

"I'm not going to make any decisions until I get a chance to talk to the prime minister," he told CP. 

As for Flaherty's letter to the Halifax Chronicle-Herald, Keddy said he did not know if they were his own words of if they were those of the PM's director of communications, Sandra Buckler.

"It doesn't matter who wrote them, his name's attached to them," he told the wire service. 

Meanwhile, the Liberals and the NDP expressed outrage at Harper's handling of the situation. 

"What is the Prime Minister's response?" NDP Leader Jack Layton asked in question period. "'I'll sue you.' That is his response. What kind of way to run a federation is that?"

Liberal MP Michael Ignatieff accused Harper of being "at war with the provinces." 

After question period, Liberal MP Scott Brison, who would most likely be sitting in the Nova Scotia Tory caucus today had he not crossed the floor to become a Liberal in 2003, accused Harper of trying to destroy the last bastion of Red Toryism in Atlantic Canada.

"It's very clear that Stephen Harper has contempt for the people of Atlantic Canada, does not respect members of his caucus from Atlantic Canada, does not respect his ministers from Atlantic Canada," he told reporters. 

"If Stephen Harper can't convince people like Bill Casey, members of his own caucus, that he's telling the truth, how can he convince Atlantic Canadians he's telling the truth?"

Exactly one week ago today, Casey, who is now sitting as an Independent Progressive Conservative, propelled the issue to top of the political agenda in Ottawa when he said he would vote against his government's budget bill. 

Speaking to reporters after question period, Casey said despite the prime minister's comments Monday he expects the Tories will pay the price at the polls in the next election. 

"Nova Scotians know how to vote either way. Believe me I've seen them do it first hand," said Casey, who was defeated in 1993 and elected again in 1997. 

"If they decide to send a message they'll send it strongly. They sent it to the Conservative party one time, they sent it to the Liberal party. In 1997, all 11 seats were Liberal. (They) threw them all out."

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