Prime Minister Stephen Harper and Liberal Leader Michael Ignatieff reached a deal on Tuesday to examine employment insurance reform, averting the possibility of a summer election following days of speculation over the fate of the minority Conservative government.

Liberal Leader Michael Ignatieff outlines his party's positions on an agreement reached Wednesday with the Conservative government to avert a summer election. (Sean Kilpatrick/Canadian Press)

Earlier this week, Ignatieff had threatened to withhold confidence in a budget estimates vote on Friday unless Harper provided answers on a series of issues, including the Tories' unspecified plans for more EI proposals in the fall.

But after a series of face-to-face meetings in recent days, the political rivals agreed to create a working group on employment insurance that will have three members selected by the Liberals and three by the Conservatives.

During a news conference outside the House of Commons, the prime minister said he was "delighted" Canadians would not have to go to the polls in the summer and is "optimistic" a deal on "realistic" changes to the EI system could be reached.

“The good news we have today for people is that the breakthrough we actually have is a willingness of the government and the Official Opposition to work together on an important public policy matter,” he said.

Less than an hour earlier at the same location, Ignatieff told reporters the deal provided a "break to the impasse" over EI and secured "substantial gains" from the government.

"I feel that this is a good day for our country," Ignatieff said. "But more importantly, it's a good day also for this system of Parliament."

But Harper reiterated his party would not give in on Ignatieff's earlier proposal for a 360-hour annual threshold for EI eligibility, which the Tories have labelled the “45-day-a-year work week.”

"We are open to other changes, as I've said last week, and we're glad it's happening," he said. “We have all heard the message that the people of Canada do not want an election. The people of Canada want the parties to work together to fix the economy, and that is what we will be doing."

PM warns of 'opposition coalition' in fall

Prime Minister Stephen Harper speaks with the media outside the House of Commons on Wednesday after a caucus meeting. (Adrian Wyld/Canadian Press)Under the pact, Harper agreed to give the Liberals an opposition day motion within eight days of the start of the fall session of Parliament — a key opportunity to trigger an election.

But the prime minister warned a fall election that he said "nobody wants" would bring "pretty dangerous results" for the country which is already struggling with a recession.

Harper also raised the spectre of the Liberals forming another proposed coalition with the NDP and supported by the Bloc, despite Ignatieff's repeated assurances the coalition idea was "dead."

"Nobody wants to see the opposition coalition we had at the end of last year," Harper said. "I think everybody in the public recognized the dangers that presents to the country."

He said his minority government has operated in an environment of "constant threat" of an election, which he didn't welcome or think was "useful."

"But when we're faced with them, we make sure we're prepared," he said.

But Ignatieff defended his actions as Opposition leader, saying it was his job to hold the government to account.

The Liberal leader also denied he had been bullied into backing down on his demands on employment insurance threshold.

"Do I look like I've been steamrolled? Next question," he said, and pointed to another reporter.

But NDP Leader Jack Layton, who agreed last year to topple Harper's Tories and form a coalition government with the Liberals under former leader Stéphane Dion, said the working group was "cold comfort" for 1.5 million unemployed Canadians contending with a flawed EI system.

He noted an NDP bill, with support from the Liberals and the Bloc, has already passed the House and could be amended to make immediate changes.

"We're open to changes. Let's get it done before the summer," said Layton, who was in Toronto on Wednesday celebrating the birth of his granddaughter.

"Sadly, these two decided to go off and have dinner and talk about their own futures a little bit more than they were thinking about the people who needed the help right now."

Report due by Sept. 28

The working group's discussions will include a consideration of the eligibility criteria for EI, including possible coverage for self-employed workers and lower eligibility thresholds.

During the discussions, the Liberals will also have access to several briefing documents and data collected by the government.

A report recommending any changes will be returned to the Prime Minister's Office and is expected by Sept. 28. It would then be presented to the House of Commons for examination.

The deal also calls for the government to produce another economic report card to the House of Commons that week. Ignatieff said this was a concession, while the prime minister said the extra report came at his government's suggestion.

The Liberals will support the government's main and supplementary estimates in a confidence vote in the House on Friday, while the Conservatives will support the Liberal opposition day motion on the same day.

'Productive' talks

The agreement comes following two meetings Tuesday by the political leaders in what the prime minister's spokesperson said were "productive" talks.

The talks were aimed at avoiding having opposition parties bring down the Conservative government in a confidence vote later this week on the government's most recent economic progress report.

Harper and Ignatieff also spoke by telephone on Wednesday morning.

Ignatieff has previously said he wants a single national eligibility standard for EI during the ongoing recession — meaning people could qualify for benefits if they've worked 360 hours in the previous 52 weeks, regardless of where they live. Currently, the eligibility criteria vary by region across the country, from 420 hours worked in Gander, N.L. to 700 hours in Winnipeg.

The Liberals argue that during times of economic crisis, it should be easier for people who lose their jobs to qualify for benefits.

Harper has said that such a change would be too expensive and that recently revamped EI benefits are already generous, including a $500-million program for retraining laid-off, long-tenured workers and a prolongation of EI payments for applicants who participate in longer-term training of up to two years.

Ignatieff 'choked': Duceppe

The NDP and Bloc Québécois have called for the EI eligibility threshold to be lowered permanently, not just for as long as the current recession lasts. Both parties said they will reject the Tories' latest economic report when its financial details are put to a vote on Friday.

Speaking to reporters in Ottawa after Ignatieff and Harper, a fuming Bloc Leader Gilles Duceppe suggested Ignatieff had followed in his Liberal predecessor's footsteps by propping up the Tories and entering into a "coalition" that would deliver "nothing for the unemployed.”

"He just choked,” Duceppe said of the Liberal leader. “He looked in the mirror this morning and saw Stéphane Dion.”

Ignatieff named MPs Marlene Jennings and Michael Savage, as well as his policy adviser Kevin Chan, as his party's three members for the group.

For the Conservatives, Harper said Human Resources Minister Diane Finley would join an official from her department and an as-yet unnamed Tory representative on the panel.

With files from The Canadian Press