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Michael Ignatieff says he is ready to lead a new coalition government unless Stephen Harper's Conservatives scrap their attack ads, drop their partisan edge and present a budget that addresses the needs of Canada's struggling economy.

"He can continue down this path of divisive politics or he can start working constructively with Parliament. The choice is his," the newly anointed Liberal Leader warned on Wednesday.

Mr. Ignatieff said it us up to the Prime Minister to reach out with policies that satisfy the opposition's concerns.

The Toronto MP and internationally-known academic went before the cameras after the Liberal caucus and the party's national executive named him as interim leader, to be confirmed by members at a convention in April.

His answers to various questions made clear that Mr. Ignatieff is eager to present an image of political strength, after watching his predecessor, Stéphane Dion, repeatedly attacked as a weak leader by what he referred to as the "buzz saw" of Conservative media tactics.

Talking tough in his first news conference as Liberal leader, he said: "The challenges we face as a country are formidable. Canadians are worried about their jobs, their savings and their future. They want stability, they want leadership, and they want a government they can trust."

"... At a time when every other major government is taking decisive action, Mr. Harper has shut down Canada's Parliament."

Mr. Ignatieff went on to criticize the Prime Minister's decision to reopen the national unity debate by attacking the Liberal-NDP deal as a "separatist coalition" and said he is ready to topple the minority Conservatives.

"I want every Canadian to know that the Liberal Party is united, strong and ready to provide the leadership we need. Where Mr. Harper has failed, we can succeed."

Mr. Ignatieff noted he is willing to meet with the Prime Minister to discuss the economy, but has yet to receive an invitation.

"I'm always available, but I want him to present an alternative," he said, warning Mr. Harper not to miscalculate as he prepares the January budget.

Wednesday's developments bring to an end Mr. Dion's tumultuous term as leader.

Amid the flurry on Parliament Hill last week, it appeared for a time that he would avoid joining Edward Blake, who led the party in the late 1800s, as the only other Liberal leader not to become prime minister.

But it was not to be.

Scrummed by reporters as he made his way for the outdoors, Mr. Dion said he looks forward to working for his new leader.

"I'm very proud of the party. I'm very confident that we'll be able to help Canadians in [these] tough situations," he said. "I'm very proud to leave in a way [that] gives Canadians a great leader, with Michael Ignatieff."

The change in leadership means Mr. Dion will have to move out of Stornaway, the official residence of the Leader of the Opposition in Ottawa's prestigious Rockliffe neighbourhood. He also loses his chauffeured car.

As he made his way to the exit, he joked to reporters that he would have taken the bus to work, but Ottawa transit workers are on strike.

Liberal MPs who have been wary of the coalition proposal, including Keith Martin, said Wednesday they were encouraged by the Prime Minister's comments calling for Liberals and Conservatives to work together on the economy.

"I think Mr. Harper's comments are welcome," said Dr. Martin. "We will have to see whether they're backed up by action and words."

Liberal MPs praised Mr. Dion and insisted the coalition with the New Democrats is not dead. But they also held out the possibility that they could allow passage of the budget to be delivered by the Conservatives on Jan. 27 if it provides the kind of economic stimulus they have been demanding.

"Mr. Ignatieff has been very clear," said Dominic Leblanc, a New Brunswick MP who withdrew from the Liberal leadership race this week.

"The only responsible thing for us to do is to listen to Canadians, see what Mr. Harper proposes in the budget. He alone is responsible for the crisis he's created. And then the caucus and the leader will be in the position to make those decisions [about whether to defeat the Conservative government] when we get to the end of January."

New Democrats expressed optimism that the coalition would remain united in its resolve to bring down the minority Conservative government.

"The coalition agreement is between the New Democratic Party of Canada and the Liberal Party of Canada, irrespective of who the Liberal leader is," deputy NDP leader Thomas Mulcair said.

"Do we want more Harper or do we want a coalition? Our answer is clear. One hundred and sixty one members of Parliament signed the coalition documents last week. Their answers were clear, including Mr. Ignatieff's. We were sincere when they signed that, we assume everyone was."

But Infrastructure Minister John Baird said there is little appetite among Canadians for a government made up of Liberals and New Democrats that exists only with the support of the Bloc Québécois.

"What Canadians don't want to see is political games, they want to see real action on the economy." Mr. Baird told reporters.

"I think the government and the Official Opposition, both federalist parties, have a different set of priorities" to the Bloc and the NDP, he said, echoing statements made Tuesday by Mr. Harper. "I hope we can get [the Liberals'] ideas and suggestions. I think the Prime Minister has extended an olive branch to try to work with the Liberal party."

While Mr. Harper was extending his hand to Mr. Ignatieff, asking for co-operation on the economy, Conservative campaign manager Doug Finley was sending out "emergency" fundraising letters saying Mr. Ignatieff's acclamation as Liberal leader was a "stunning and unprecedented demonstration of Liberal contempt for our democratic rights."

When asked how the government can ask for cooperation from a leader it deems illegitimate, Defence Minister Peter MacKay said it was an internal matter for the Liberals to deal with.

"This process that resulted in Mr. Ignatieff being the Leader was on that certainly did not include broad consultation but neither did the process that would have seen Mr. Dion become the Prime Minister include broad consultation," he said.

"We hope Mr. Ignatieff will take the hand that's been extended to him on the budget."

Mr. Ignatieff enters the post with a mission to rebuild his party's readiness for an election as his priority, while keeping the option of a coalition with the NDP in his back pocket as a means to extract budget concessions in January.

His quick ascension to the leadership was hastened Tuesday when his last rival, Bob Rae, decided that new party rules for choosing an interim leader left him with no hope of winning. He gracefully urged his supporters to rally to the new leader.

Mr. Ignatieff has been reticent about the coalition drive to defeat Mr. Harper's Tories in a confidence vote. And his words - "a coalition if necessary but not necessarily a coalition" - were repeated over and over by Liberals Tuesday.

"It's a club in the bag," said Liberal whip Rodger Cuzner. "If the Prime Minister hasn't learned from the economic update, you reach for Big Bertha."

For his part, Mr. Rae said he feels that Mr. Harper has already irrevocably lost the confidence of opposition parties through excessive partisanship and divisiveness and a lack of economic action.

"I think that those are two good enough reasons to say, 'Time's up, chum,' " he said.

At 60, Mr. Rae acknowledged that his quest to lead the Liberal Party is now over for good. He gracefully heaped praise on Mr. Ignatieff, his former university roommate, and declared him the party's legitimate leader.

Mr. Rae had hoped to delay a rush to select an interim leader by calling for an electronic vote of party members in January. But he said when the party executive called for 800 party officials and defeated candidates to decide the leadership in a week, he knew he could not win.

"I know how to count," he said.

"And I look at things, and I say, 'This doesn't make sense.' "

With a report from Campbell Clark