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Paul Martin in Ottawa, Wednesday.

Paul Martin says he will continue as the Liberal party's leader until a convention to replace him is held, but he will hand over his parliamentary duties to interim leader Bill Graham.

Martin cited tradition on Wednesday in making his decision.

"I'm going to follow the tradition that has been established for a long time, and that is that I will stay as leader until the new leader is chosen at the convention," he said after emerging from the final meeting of the Liberal caucus, five days before Conservative Leader Stephen Harper is sworn in as prime minister.

"But I will be giving up all of my powers and my authority to the new interim leader."

Graham, who is outgoing defence minister, will serve as official leader of the Opposition, taking over Martin's duties in the House of Commons. In his first act, Graham named Lucienne Robillard as deputy leader. Robillard had served as minister of intergovernmental affairs.

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Bill Graham speaks to press in Ottawa on Wednesday.

"What I want to do is work with the caucus members to make the most effective opposition we can," Graham later said during an interview with Don Newman on the CBC program Politics. He promised he would lead the Liberal opposition to defend the "progressive" values of their party.

Harper issued a statement congratulating Graham as an "outstanding leader."

"Bill is admired and deeply respected, across Canada and around the world, for his steady and principled leadership," he said.

Hays takes over as Liberal leader in Senate

Martin also announced that Calgary Senator Dan Hays would become the Liberal leader in the Senate, taking over from Jack Austin.

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Lucienne Robillard (CP File Photo)

Several high-profile Liberals have ruled out a run for the party's top job, including Frank McKenna, a former premier of New Brunswick and outgoing ambassador to the United States, ex-cabinet minister John Manley, and Brian Tobin, former premier of Newfoundland and Labrador.

There is speculation outgoing Human Resources Minister Belinda Stronach, outgoing Public Works Minister Scott Brison and incoming MP Michael Ignatieff will run.

"It will be a wide-open race," said Martin.

He said it's up to the party to decide when to hold the convention.

Following Wednesday's cabinet meeting, several outgoing ministers said the mood was sad, dignified and sometimes humorous.

"It was a meeting that reflected very well, with a lot of pride, on the accomplishments of a successful administration," said Ralph Goodale, outgoing finance minister. "What we inherited in 1993, to what we turn over now in 2006 ... we can take a lot of pride."

Pierre Pettigrew, who lost his riding and won't return as a member of Parliament, said Canadians made their point.

"They definitely said, 'Liberals, you need a break,'" said the outgoing foreign affairs minister.

Others said they look forward to their roles in Opposition and holding the incoming Conservative government to its promises.

"I'm looking forward to holding them to account. The role reversal will be a little bit of fun," said Joe Fontana, outgoing labour minister.

Fontana said the Liberal party suffered a setback but remains a force with 103 seats.

"Hey, on a given day, a championship team can lose. We just happened to have a very bad second half," said Fontana.