Stephen Harper's opponents took aim at the Conservative leader's acknowledgment on Monday that Canada could be touched by global economic turmoil, while top economists painted a grim picture of the country's prospects.

dion-cp-5642128

Liberal Leader Stéphane Dion strolls with candidate Anne Park Shannon to a campaign stop in Sidney, B.C., on Monday. ((Adrian Wyld/Canadian Press))

Campaigning in British Columbia, Liberal Leader Stéphane Dion said Harper is finally waking up to the escalating crisis, but he called Harper's insistence that his party has a backup plan if needed was too "little, too late."

"For the last weeks, we told him that he needs to wake up and say to Canadians that indeed, we have tough times, and indeed, the government will help you," Dion said during a campaign stop in Sidney, B.C., north of Victoria.

"What Canada needs is a government that believes in the role of the government, to help the people."

Dion's comments came as a report by economists from Canada's major banks predicted the country is headed into a worse recession than anyone expected, one that could last until almost 2010.

layton-debate-cp-5616370

NDP Leader Jack Layton says his party is the only real alternative to Stephen Harper's Conservatives. ((Tom Hanson/Canadian Press))

The Toronto Stock Exchange's benchmark index fell almost 1,200 points at one point on Monday before recovering to close down 573 points, or 5.3 per cent, at 10,230.43. In New York, Dow Jones industrial average dropped below 10,000 for the first time in four years, closing 369.88 points, or 3.6 per cent, lower at 9,955.50.

NDP Leader Jack Layton panned Harper's economic record, saying the Conservatives have done nothing during nearly three years in office.

Harper isn't going to do anything to protect jobs and savings, Layton told a crowd gathered in the Vancouver-Kingsway riding.

"Pull one thread and the whole sweater unravels, and it's the people in Canada who get left out in the cold," Layton said Monday, referring to ads showing Harper clad in sweaters to soften his image.

Harper defends Tories' record

In an interview late Monday afternoon with the Business News Network, the Conservative leader sought to speak directly to worried investors about the sliding markets, saying his government has taken a number of actions that "have set us in good stead."

"I don't think we've been unresponsive at all,"  Harper said, while again praising the relative stability of Canada's mortgage and banking sectors.

harper-inside-cp-5642656

Conservative Leader Stephen Harper leaves the studio following a television interview at a local station in Montreal on Monday. ((Tom Hanson/Canadian Press))

"Obviously, we may have to take additional actions, but what I think is important is that we stay with the fundamentals of our plan, which is to keep our budget balanced, to keep our taxes going down and to make sure when we're spending money, we can afford that and that it's directed towards investment and towards job creation."

While he said he understood investors were increasingly concerned, Harper added the opposition parties would seek to raise taxes on energy and other commodities businesses, which are among the companies hardest hit by the stock market turmoil.

"These are exactly the worst possible policies we could have at this time," he said.

Dion struck back at Harper's accusation during last week's federal leaders' debates that the Liberal leader was "panicking" by announcing a Liberal government would hold emergency meetings with Canada's top financial leaders and premiers to provide a fiscal update within the first 30 days of its mandate.

"During the debate, four hours of debate, I challenged him and he continued to say that I was panicking," Dion said. "I was not panicking, I was answering to the crisis, as all the leaders of the world are but Stephen Harper."

Dion also took aim at the New Democratic leader, saying people worried about their jobs should think twice about voting for Layton "because right now, the only job a vote for the NDP will save is Stephen Harper's job."

Canada's financial system 'not immune' to turmoil: Flaherty

The latest poll results from Canadian Press-Harris/Decima indicated another drop in support for the Conservatives over concerns about the economy ahead of the Oct. 14 election. Harris/Decima president Bruce Anderson said Harper risks being perceived as "too measured in his reaction."

Germany joined Ireland and Greece on Sunday in guaranteeing all private bank accounts as governments across Europe scrambled to save failing banks.

In a statement issued Monday, Finance Minister Jim Flaherty said Canada's financial system has handled the persistent global market turmoil  "very well," but is "not immune to the ongoing turmoil in global credit markets."

"The government of Canada stands ready to take whatever actions may be necessary to protect the stability of the Canadian financial sector," he said, but did not elaborate on what those actions might entail.

Earlier in the day, Harper responded to news that world markets plummeted again as government bank bailouts in the U.S. and Europe failed to calm fears of a global financial crisis.

Harper said he remains "optimistic" about the economy, but acknowledged the ripples of the global crisis could reach Canada's shores.

"Look, we're not an island. We can't pretend, and we're not pretending, that we will escape effects of world developments," he said at a campaign announcement in Ottawa about child-care benefit improvements.

Harper said he is watching developments around the world very closely for any possible rebound effects on Canada. The Conservatives have a Plan B to assist the Canadian banking system if the crisis spreads here, he said, but insisted Canada remains in a better situation than other countries.

But Bloc Québécois Leader Gilles Duceppe said Harper was trying to "escape his responsibilities" by triggering an election.

"One of the reasons for holding this election prematurely was to avoid facing a difficult economic situation," Duceppe told reporters during a campaign stop in Magog, Que. 

"And now, the economy has caught up with him much earlier than he thought."

Minor improvements to child benefit

At the campaign stop at Ottawa's Gymboree Play & Music centre, Harper pledged small upgrades of the universal child-care benefit.

"We're only making promises that we know we can keep," Harper stressed.

Harper said a Conservative government would index the $100 monthly child care benefit to inflation, adding several dollars a month and returning about $50 million per year to parents on top of the $2.4 billion under the current system.

"This will ensure that the value of the benefit does not erode over time," he said.

The taxable benefit introduced by the Tories is available to families for each child under the age of six and replaced the Liberals' five-year national $5-billion child care plan.

Sole-support, single-income parents will also get the child-care benefit tax free, a measure that would save families another $50 million, Harper said.

"We're not pretending that the government of Canada is paying all child-care expenses," Harper said.

"What we're saying is we're prepared to give help to families that we know the taxpayers can afford and that we'll assist with child-care costs."

But Layton mocked the measure, saying it added up to a pittance more for working families.

"This is Stephen Harper's $2.67-a-month day," he told supporters in B.C.

War of words between Duceppe, Harper

Harper also continued his war of words with Duceppe on Monday in attempts to win the key battleground of Quebec.

Duceppe delivered a scathing criticism of Harper in a speech in Montreal on Sunday, where he slammed Harper's economic and foreign policy and called him a "cheater" for giving a speech in 2003 that contained passages lifted directly from an address given earlier that year by Australia's then-prime minister, John Howard.

Harper dismissed Duceppe's comment, saying it was too late to paint him as the "devil incarnate" after Duceppe supported the Tories on a regular basis during their first two years in office.

"This type of personal attack does not really represent true character of the Quebec nation," Harper added, saying Quebecers would see through the comment.

Duceppe rejected suggestions that the back-and-forth jabs could affect how the two work together once the election is over.

"An election campaign is a struggle," he said. "When the time comes to decide, to take decisions on the basis of citizens, we'll all have to take those interests into account."

With files from the Canadian Press