Michael Ignatieff, who enjoys the support of a majority of Grit MPs and senators, appears poised to become federal Liberal leader at a caucus meeting Wednesday when Stéphane Dion is expected to step down.

The prospect of a caucus vote installing Ontario MP Ignatieff in the top Liberal job emerged late Sunday after the party's national executive gave a rough reception to a last-minute proposal to give all party members a vote by a combination of phone and online ballots early next month.

No final decision was made but insiders said it appeared the proposal, supported by rival Bob Rae, will not fly.

Liberals are virtually unanimous that the leadership question must be settled quickly and well before a Jan. 27 budget vote that could plunge the country into another election or see the Harper Conservatives replaced by a coalition government.

If there is to be no nationwide vote by party members, a caucus vote is the only other option left to find a replacement for Dion, who is expected to resign Wednesday at the caucus meeting. Some Liberals speculated he may go as early as Monday.

Under the party constitution, as soon as the leader resigns, the national executive, in consultation with the caucus, can choose an interim leader.

Many Liberals now expect Ignatieff, a former Harvard professor, will be chosen Wednesday by caucus as interim leader — to be made permanent by a ratification vote at a previously scheduled May 2 leadership vote.

Ignatieff is also expected to get a boost Monday, picking up the support of the third leadership contender, New Brunswick MP Dominic LeBlanc, who is expected to drop out of the race and endorse Ignatieff. But top insiders in LeBlanc's camp continued to insist late Sunday that no final decision has been made.

Contenders agree party needs new leader before Jan. 26

Despite arguments over the best way to replace Dion, there was a consensus that the Liberal party needs a new, permanent leader before Parliament resumes on Jan. 26.

"We need to find a leader of the party before the House comes back at the end of January," leadership candidate Bob Rae told CBC News earlier Sunday."

On Thursday, Prime Minister Stephen Harper persuaded Gov. Gen. Michaëlle Jean to suspend Parliament and ward off the possible demise of his minority Conservative government.

That move came after the Liberals and NDP agreed to form a coalition headed by Dion and aimed at ousting Harper's government, which the opposition accused of failing to propose an adequate plan to deal with the economic crisis. The Bloc Québécois is not an official member of the coalition, but has agreed to support it on matters of confidence.

"Mr. Dion has indicated that as soon as a new leader is chosen, he will step down, and I think the party is obviously considering ways in which the leadership race can be moved forward," Rae said.

Ignatieff echoed the sentiment on CTV's Question Period on Sunday.

"There's an emerging feeling in the caucus that, given the importance of this [Jan. 27 budget] vote in late January, it would be appropriate to have a permanent leader in place," he said. "The caucus is considering various options about how to do that."

Manley urges party to choose new leader before Christmas

In an opinion piece in Saturday's Globe and Mail, former Liberal deputy prime minister John Manley said the Liberal caucus and party executive should move to choose a new leader before Christmas.

"As a Liberal, I believe the first step for my party is to replace Stéphane Dion as leader with someone whose first job is to rebuild the Liberal party, rather than leading a coalition with the NDP," Manley said.

Manley said the idea that the public would welcome Dion as prime minister after having rejected him during the Oct. 14 federal election "was delusional at best."

"Mr. Dion had seemed to accept responsibility for the defeat (although somewhat reluctantly), and should have left his post immediately" after the vote, wrote Manley, who is now a counsel at McCarthy Tétrault LLP.

"Furthermore, in agreeing to the terms of the coalition with the NDP and the Bloc, Mr. Dion bound his successor to a controversial arrangement without even consulting any of the candidates to succeed him in the process, leaving them no option but to endorse it or break with him as party leader."

Rae also said on Sunday that a closed-door decision by the Liberal caucus and party executives — both of which are top-heavy with Ignatieff supporters — wouldn't be the right way to choose a permanent leader.

"It can't simply be a small group of people behind closed doors," he said, adding it would be inappropriate.

Accelerated leadership race

Rae told CTV that an accelerated leadership race, including televised debates and a vote by rank-and-file members, could be organized with the goal of installing the winner "by the middle or third week of January."

If Dion should decide to step down before then, he said, it would be all right for the two bodies to select an interim leader to fill in while the process runs its course.

Last week, the Conservatives mounted a massive public relations campaign, including anti-Dion television and radio ads, contending that a leader whose party captured just 25 per cent of the vote in the Oct. 14 election doesn't have a legitimate mandate to govern.

Many Liberals acknowledge privately that Dion's continued presence as the public face of the party has complicated efforts to sell the idea of an alternative coalition government.

They point, as an example, to the embarrassing communications snafu last week in which Dion's team was an hour late delivering a videotape to broadcast outlets offering the Liberal response to a televised address by Harper.

With files from the Canadian Press