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Canada's Trudeau hangs onto power in election; aides see two-year respite

By David Ljunggren

OTTAWA (Reuters) - Canadian Prime Minister Justin Trudeau hung onto power after an election on Monday that saw his government reduced to a minority, but aides predicted he would be able to govern for two years without many problems.

Trudeau, one of the world's most prominent progressive politicians, struggled to overcome the effects of two domestic scandals. His Liberals only won 156 seats, a decrease of 21, preliminary results showed.

He now looks set to govern with the left-leaning New Democrats, who have 24 seats. Together the two parties can muster a majority 180 seats in the 338-seat House of Commons.

Minority governments in Canada rarely last more than 2 1/2 years. Although the New Democrats lost 16 seats, leader Jagmeet Singh is now in a good position to press for action on priorities such as more social spending and increased action on climate change.

One senior Liberal also noted that many legislators needed to serve for another two years to meet the six-year requirement for a Parliamentary pension.

"That gives us a pretty free hand for that period," said the Liberal, who requested anonymity given the sensitivity of the matter. Asked whether Trudeau would reach out to Singh soon, the Liberal said "We'll see."

The New Democrats struck deals to help keep Liberal minority governments in power from 1972-1974 and in 2005.[L2N277069]

The Canadian dollar held near a three-month high, although some investors worried about the fiscal implications of the Singh's influence on policy.

Trudeau barely mentioned the loss of his majority, telling supporters that he had "a clear mandate" for a progressive agenda and more action to combat global warming.

This is unlikely to please the western provinces of Alberta and Saskatchewan, which cast out every Liberal legislator amid anger over what the energy industry sees as overly stringent environmental rules.

The most prominent victim was Public Safety Minister Ralph Goodale, one of Trudeau's top cabinet members.

The election was also a disappointment for Andrew Scheer, leader of the opposition Conservatives, who had sought a majority. Although the Conservatives won the popular vote, they only gained 25 seats, ending the night with 122.

Scheer said he would continue to lead the party, but the result looks set to reopen questions about his future. Even before the election, some in the party were speculating about a leadership challenge if he lost.

(Reporting by David Ljunggren. Editing by Gerry Doyle)

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