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NDP Leader Jack Layton wants a full public inquiry into the allegations surrounding former prime minister Brian Mulroney and controversial businessman Karlheinz Schreiber.

Late Friday, Prime Minister Stephen Harper announced he would appoint an independent third party to review dealings between Mulroney and Schreiber.

"An independent third party is not going to be able to have the power of subpoena, he's not going to be able to drill down and get the truth," Layton told Â鶹ӰÊÓnet on Saturday.

"And right now, the allegations are swirling around in such a devastating way that it's affecting peoples' faith in our democratic system."

Harper said at Friday's news conference that members of the government shouldn't have any dealings with Mulroney until after the investigation is complete.

The latest developments came after Schreiber filed a court affidavit that implicated Mulroney in inappropriate business dealings while he was prime minister.

Mulroney, the Progressive Conservative prime minister of Canada between 1984 and 1993, said he would co-operate with any inquiry. He has denied any wrongdoing in the relationship between himself and Schreiber, a German-Canadian businessman whose extradition is being sought by the German government.

However, critics accuse Mulroney of not providing a full explanation of how he came to accept $300,000 in three cash payments from Schreiber, with the first payment of $100,000 coming mere weeks after he left the prime minister's office.

Harper said Friday the independent party will look into the seriousness of Schreiber's allegations.

Stalling?

Some critics have characterized Harper's call for an investigation as a delaying tactic. When new information about the two men's dealings was initially reported a week ago, Harper rejected calling an inquiry.

Harper said Friday that he was prompted to act because the latest allegations involve Mulroney's time as prime minister.

Layton said he thinks Harper is stalling.

"It's only a partial step and it really slows down the process of getting to the bottom of the matter," he said.

"Does anyone doubt that this independent third party ... that he's going to say, 'you better bring in a judge?'" Layton asked.

"I don't think so. That's why we might as well get on with it now."

Layton noted it took full inquiries to get to resolve the Maher Arar case and resolve issues related to the Air India investigation.

"The truth doesn't come out easily sometimes on these matters," he said.

Liberal Leader Stephane Dion called Friday for an inquiry.

He said the affidavit leaves questions about when the prime minister and his cabinet may have become aware of the allegations, and why a Justice Canada investigation was stopped when Harper took office.

Liberal MP Mark Holland also criticized the prime minister for stalling, saying Harper's office received information on the "explosive" allegations seven months ago.

"It is beyond belief, one would have to completely suspend imagination, to think that this information wouldn't have been passed on to the prime minister when it is so significant," Holland said.

"This raises some very significant questions about what the prime minister knew and when he knew it," Holland said.

Holland went on to say that allowing the Harper government to appoint an investigator "isn't enough" because of Mulroney's close ties to Harper and the Conservative party.

"We need an independent judicial review; we need something that goes further. This is something that touches the highest office in the land," Holland said.