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Michael Ignatieff announces his resignation as the leader of the Liberal Party at a press conference in Toronto, Ont. May 3/2011.

You know your party's in trouble when its caucus has more senators than incoming MPs, which will be the case next week when dispirited Liberals meet in Ottawa to chart their near-term future, such as it is.

The massive losses sustained by a former governing party that now has little national presence outside Atlantic Canada has left some stalwarts contemplating a merger with the NDP.

"It's clear that the centre-left has to get its act together," Brian Murphy said on Tuesday. The two-term Liberal MP lost his Moncton seat in part thanks to a big boost in the NDP vote that allowed the Conservatives to come up the middle.

"A Liberal should get up there and think about the future," he said. "That has to be defeating the Conservatives. That has to be the whole goal."

Even some of the party's most senior leaders think the idea needs at least to be discussed.

"I'm not one of those who thinks there should be taboo subjects," said Bob Rae, a former NDP Ontario premier who is now one of the few surviving Liberal MPs from Toronto.

But he insisted the party's priority must be to reconnect with and listen to its base.

Such talk would have been anathema to most Liberals mere weeks ago. But the party is broke, demoralized, in third place in the House of Commons for the first time ever, and searching for a third leader in five years - always a telling sign of a party in danger of collapse.

With Michael Ignatieff announcing on Tuesday that he will step down as leader - he could hardly do otherwise after losing his seat - the first order of business will be to choose an interim leader for the party. Mr. Rae and MP Ralph Goodale are obvious candidates, although both may pursue the leadership outright instead.

The next step will be to determine how long to wait before holding a leadership convention. Most party insiders are urging a period of a year or more, so that potential candidates and the party itself can consider the future.

That future looked even bleaker once the rush of returns on Monday night had been digested. Case in point: The Liberals now have more MPs in Atlantic Canada than in any other region of the country: 12, as opposed to seven in Quebec, 11 in Ontario, and four in Western Canada, all regions with many times the population of the Maritimes and Newfoundland and Labrador.

On top of the debts the party accumulated during the election campaign, it will lose some of its public funding. That funding is based on the number of votes cast for each party. Though turnout was a couple of percentage points higher in this election, the party's share of that vote declined to 18.9 per cent from 26.3 per cent in 2008.

And that public subsidy will eventually disappear if, as expected, the Conservatives eliminate public funding for political parties entirely.

The dire situation for the Liberals, coupled with the tremendous surge of support for the NDP, is the basis for speculation that the only way the Conservatives, who forged a coalition of parties on the right, are going to be defeated is through a similar coalition of the parties on the left.

But most senior Liberals are publicly discounting such talk, including the outgoing leader.

"I think the surest guarantee of a future for the Liberal Party of Canada is four years of Conservative right-wing government and four years of NDP left-wing opposition," Mr. Ignatieff said Monday. "I think after that experience, Canadians will, I hope, again discover why you have a Liberal Party in the centre."

New Brunswick MP Dominic LeBlanc also dismissed any possibility of a merger on Tuesday. He and Quebec MP Justin Trudeau are favourites in the nascent race for the Liberal leadership. By tradition, that leadership rotates between an anglophone and a francophone, making it a francophone's turn - though tradition might not be the best guiding principle for a party in such dire straits.

Mr. LeBlanc is neither ruling in nor out a leadership bid. As for Mr. Rae: "I'm in a period of reflection," he said.

When thinking about the future leadership, Mr. Ignatieff ruminated on whether it might be time for a new generation to come forward to rescue the party.

"There must be somewhere out there… [someone]who thinks - he didn't get there, but I will," he said.

He hopes it will be a young woman. That, at least, would be welcome first for a party that is currently only setting records for new lows.

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