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Police conduct a search inside city hall as they investigate Laval mayor Gilles Vaillancourt in Laval, Quebec, October 4, 2012.Christinne Muschi/The Globe and Mail

The Quebec government has begun stitching the wounds of Montreal, a city torn apart by revelations of corruption and kickbacks that cost its mayor, Gérald Tremblay, his job and now threatens its economic stability.

With the city entering a crucial period of transition, the Parti Québécois government insists Montreal should put the corruption scandal behind it. This is not the time, the PQ argues, to hold a mayoral by-election that would likely focus only on the issue of integrity.

The PQ government also promised on Tuesday to adopt a new law by Christmas on the financing of municipal political parties to clean up the system of influence peddling and kickbacks that has spread to several municipalities in the province.

"We want the city to be moving forward concretely – in projects, in job creation, in culture – and that's the era we're starting now," said Jean-François Lisée, the minister responsible for Montreal.

Mr. Tremblay, who resigned on Monday, still had a year left in his four-year mandate. But he was forced from office after testimony before the Charbonneau commission alleged that he was aware of illegal funding practices in his municipal party. Mr. Tremblay vehemently denied the charges.

It isn't clear whether a conversation on Saturday with Premier Pauline Marois had any effect on Mr. Tremblay's decision to resign. Ms. Marois wouldn't reveal the nature of the conversation but the PQ government had certainly lost confidence in Mr. Tremblay's ability to weather the storm. The PQ defended Mr. Tremblay's integrity Tuesday, concerned that continued attacks could further undermine the city's reputation.

"My only hope is that he will get a chance to go before the Charbonneau commission and defend himself and defend his reputation," Ms. Marois said.

Sylvain Gaudreault, Minister of Municipal Affairs, argued that once the new anti-corruption law is adopted next month it will be a positive signal to investors. At least $70-million in municipal projects are currently on hold, he said, and several other major initiatives are waiting to be announced.

"My responsibility is to assure that the transition period will be perfect and that the major projects that will allow Montreal to project itself into the future will proceed," Mr. Gaudreault said.

In Montreal, city hall officials began moving to fill the political vacuum created by the bombshell resignation.

While the former mayor has not been charged with any crime and is not suspected of personal corruption, many Montrealers hold him accountable for the rot that has spread through the municipal apparatus on his watch. Many responded approvingly to his departure after 11 years in office.

Business leaders said the mayor had lost the authority to govern. "It had become difficult for the mayor of Montreal to ensure the necessary leadership to properly run the city and re-establish the link of trust with Montrealers," Board of Trade president Michel Leblanc said in a statement.

Meanwhile, the 62-member city council will select an interim mayor within a month to lead Montreal until elections are held in a year.

Mr. Tremblay's resignation may end up weakening his Union Montréal party's grip on running the city. The two municipal opposition parties are seeking a place on the powerful executive committee to give them a hand in managing Montreal.

"We need to represent [the whole] political spectrum of our city, and ensure our first goal is to rebuild the trust in the administration …," said Louise Harel of the opposition Vision Montréal party. Both Ms. Harel and Richard Bergeron of the opposition Projet Montréal party plan to run for mayor next year.

Federal Liberal MP Denis Coderre, who is widely rumoured to be preparing a run for the mayor's chair, praised Mr. Tremblay's withdrawal from politics. Mr. Coderre is to announce his plans for the Montreal mayoralty on Friday.

"It's not my place to judge Gérald Tremblay. I think he made the right decision," Mr. Coderre said in Ottawa. He urged political opponents in Montreal to set aside their differences to manage the city through the crisis. "Let's put partisanship aside and look after Montreal and Montrealers," Mr. Coderre said.

Montreal isn't the only city in the province under close scrutiny. The allegations of corruption in Laval, the province's third largest city, and Mayor Gilles Vaillancourt were also being carefully monitored. And so was the coming criminal trial involving the Mayor of Mascouche, just north of Montreal.

Mr. Gaudreault said he was awaiting a decision by the Laval mayor on his political future, suggesting that Mr. Vaillancourt should follow Mr. Tremblay's lead and resign.

Quebec's anti-corruption squad raided several engineering firms in Laval Tuesday, including Genivar Inc., one of four companies being investigated for allegations of corrupt practices linked to infrastructure projects. The other three companies are Groupe Dessau, Cima+ and Aecom, but publicly traded Genivar is the largest. There have been no arrests and officials for the anti-corruption squad said witnesses are being questioned.

Police have executed almost weekly raids in Laval, hitting a long list of construction companies along with city hall and two homes belonging to Mr. Vaillancourt and his bank safety deposit boxes. The mayor took sick leave on the day several of his bank deposit boxes were seized.

- With reports from Bertrand Marotte and Les Perreaux in Montreal