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Newfoundland and Labrador Premier Danny Williams says if anyone is damaging the business climate in his province, it's Prime Minister Stephen Harper.

"This is not a fight that we picked ... he made a promise to us, we're not looking for a confrontation," Williams told Â鶹ӰÊÓnet's Mike Duffy Live on Wednesday.

In a series of newspaper ads running across the country, Williams accuses the prime minister of breaking a promise to fix equalization and address the so-called fiscal imbalance.

Harper insists his government hasn't broken any promises and has come up with a solution that benefits Newfoundland and Labrador. He says Williams is overreacting.

"What we're seeing is confrontation for the sake of confrontation," the prime minister said in question period Wednesday.

"I agree with Newfoundland Opposition leader Gerry Reid who says that this kind of confrontation is damaging the business investment climate of Newfoundland and Labrador."

The ads feature a white Maple Leaf on a red background and the question: "Is this what Canada stands for?"

"If we can't accept at face value the promise of our Prime Minister, then who can?"

The ad also invokes a proverb that the Conservatives used in campaign literature in the province: "A promise made should be a promise kept. And as Mr. Harper pointed out, there is no greater fraud than a promise not kept."

MacDonald defends Williams

Nova Scotia Premier Rodney MacDonald has also heavily criticized Ottawa's new equalization formula.

On Wednesday he defended Williams' use of attack ads to publicize the issue, but said he has not made firm plans on whether his own government would take a similar course of action.

Meanwhile, Labrador MP Todd Russell said Williams' ads were "spot on" in their attack on Harper.

"I would use the 'L' word to categorize him, there's not doubt about that," said Russell.

"He lied to the people of Newfoundland and Labrador, he lied to Saskatchewan, he lied to Nova Scotia, and he's ghettoizing Atlantic Canada."

Harper had promised that the budget's solution to the fiscal imbalance would fully exclude non-renewable natural resource revenue from the equalization formula used to calculate payments to have-not provinces.

Williams said it wasn't a "flippant" promise, but "a very strong commitment" made in letters to premiers, in election blueprints, in speeches and in a pamphlet sent to households in Newfoundland and Labrador.

The purpose of the ads, he said, is to make Canadians aware that "the prime minister has broken a promise to Newfoundlanders and Labradoreans, Nova Scotians and Saskatchewanians and in fact it could happen to them."

While he couldn't tell people what party to support federally, Williams said he would advise people to not support the Conservatives.

People need to take the broken promise "under serious consideration," he said.

Budget details

Finance Minister Jim Flaherty's new budget allows receiving provinces to choose whether their equalization payment is calculated based on a formula that includes 50 per cent of their revenue from non-renewable resources, or excludes all of it. The option was recommended in a report to the government by Al O'Brien.

Williams says both options mean a loss for Newfoundland and Labrador, while other provinces stand to gain from the new arrangement.

The new budget -- which survived a confidence vote in the House of Commons on Tuesday with the support of the Bloc Quebecois; Newfoundland Conservative MPs supported it -- also establishes a cap on how much have-not provinces can receive as resource revenues rise.

Williams is also opposed to that measure.

"The problem is that in that same brochure, in that same householder, and in those commitments, there's no mention of a cap, in fact in the brochure that was sent around it specifically said there's no cap," Williams said.

"Well the O'Brien report has a cap and that's basically what cuts off the benefit to Newfoundland and Labrador, to Nova Scotia and of course to Saskatchewan. So it basically neutralizes any benefit that was coming from the deductibility of non-renewable resource revenue."

Williams also claims the new budget reverses progress made with 2005's Atlantic accord, a deal signed with former Liberal prime minister Paul Martin. It allowed Newfoundland and Nova Scotia to keep their oil revenue without having their equalization payments docked.

Harper, however, maintains that the budget comes through for Canadians.

Fisheries Minister and Newfoundland MP Loyola Hearn said the ads "are neither factual nor truthful" and Williams' comments damage relations between the levels of government and make it difficult to move forward.

He said the government was forced to impose a plan that would work for everyone because the provinces were unable to come up with a system they could all agree on. 

With a report by NTV's Michael Connors and files from The Canadian Press