(Repeating to additional subscribers)
By Randall Palmer and Louise Egan
OTTAWA, April 8 (Reuters) - With the crushing defeat suffered by the Parti Quebecois (PQ) in Monday's provincial election, Canadians are once again wondering aloud whether voters have finally buried the decades-old nationalist dream of an independent Quebec.
Most Quebec watchers insist that it's too early to write the obituary, pointing out that the sovereignty party has suffered setbacks before. But at best the PQ appears to be on life support, having taken its lowest share of the vote in the predominantly French-speaking province since its first campaign in 1970.
"It is very difficult to figure out how it can actually get to the finish line," University of Montreal political scientist Pierre Martin said.
Anti-separatist Liberals won a convincing majority of seats in the provincial assembly. That means no referendum on independence - a wrenching experience that the province weathered in 1980 and 1995 - for at least four years, and perhaps much longer.
That assurance of stability, combined with a more pro-business program than the outgoing Parti Quebecois minority government, should provide an economic fillip for a province that has faced some of Canada's biggest economic challenges.
In recent years, under the PQ government and its Liberal predecessor, Quebec's economy has turned in a lackluster performance, and private-sector job creation has lagged. Its 49 percent ratio of net debt to gross domestic product is the highest of any Canadian province.
REFERENDUM ON A REFERENDUM
Economic issues were not front and center during the campaign. The vote turned into a referendum on a referendum - that is, on whether the PQ would launch a plebiscite on leaving Canada if it won a majority of seats.
The issue crystallized early on when high-profile PQ candidate Pierre Karl Peladeau, who recently stepped down as head of the Quebecor media empire, gave a rousing cry for independence, pumping his fist in the air as he said he wanted "to make Quebec a country."
Forced to address the issue, PQ leader Pauline Marois refused to rule out a referendum, saying only there would be none if Quebecers did not want one. When the voters eventually spoke, Marois lost her seat and stepped down as party boss.
The PQ and the Bloc Quebecois, a sister party that has contested seats in the Canadian House of Commons, have shown that separatists are electable when they play down their ultimate political goal. But Monday's results showed what happens when independence becomes the central issue.
That said, the scale of PQ's defeat suggests a deeper, generational shift in political sentiment in the province.
"There's a definite historical downward trend," Martin said, referring to the declining share of the vote the PQ has garnered since peaking at 45 percent in 1994. On Monday, the party took about 25 percent.
For years, separatism's biggest support has come from baby boomers, voters now in their 50s and 60s. While younger voters overwhelmingly identify more as Quebecers than Canadians, Martin said, they do not equate that with a political project like independence. Many appear to be more concerned with the environment or simply getting a job and raising a family.
That could spell trouble for the Parti Quebecois, founded with the goal of advancing the cause of independence.
A francophone reporter asked Quebec Liberal leader Philippe Couillard on Tuesday if he agreed with the rush he saw in much of English-speaking Canada to declare the death of the sovereignty movement.
"An idea never dies - ideas should not die," Couillard said. "The question that could be asked is what the capacity of this idea is to mobilize the population politically and to form a government."
The results buoyed financial markets on Tuesday. Investors had been pricing in a small chance of a PQ victory, said Royal Bank of Canada chief economist Craig Wright.
"There was some, albeit small, probability that the PQ would fare better than they did and hold an eventual, potential referendum, and that was probably weighing on Canadian markets," Wright said.
The yield on Quebec 10-year bonds, a measure of perceived risk, narrowed to nine basis points higher than similar Ontario bonds, from 18 points early in the campaign.
The Canadian dollar firmed against the U.S. dollar to its strongest in nearly two months, although the Quebec election was just one of several factors influencing the currency.
"It is a majority government, so it gives us four years of stability," said Sean Roosen, chief executive officer of Osisko Mining Corp, which operates a gold mine in the province and is subject of a takeover battle. "Quebec's got a clear mandate to run business for four years now."
The province's unemployment rate in March was 7.6 percent, compared with the national average of 6.9 percent. It lost a net 27,000 private-sector jobs in the last year while neighboring Ontario added 100,000.
Marois, the ousted PQ premier, had enacted a new mining royalty regime, although it was not as high as feared, and had toyed with the idea of raising taxes on the rich, though he pulled back on that proposal.
Premier-elect Couillard's first budget, expected in late May or early June, is likely to be more business-friendly, revealing how he plans to follow through on a promise to boost private-sector job creation.
Couillard, like Marois, pledged to eliminate the provincial budget deficit in 2015-16. But Wright at RBC said the real test would be tackling the public debt.
"I think balancing the budget is achievable. The bigger issue is how much further to go into surplus ... to stabilize and eventually improve their debt-to-GDP ratio," he said. (Additional reporting by Nicole Mordant in Vancouver; Editing by Frank McGurty and Douglas Royalty)
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