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May 11, 2010 at 09:08am IST

UK PM Brown to quit to keep Labour in power

London: British Prime Minister Gordon Brown said on Monday he would step down this year, sacrificing himself to give his Labour Party a chance of forming a government with the smaller Liberal Democrats.

The Lib Dems are already being courted by the Conservatives, who did best in an election last week. But Brown said in a statement in front of his official residence at 10 Downing Street that the Lib Dems now wanted to talk to Labour too.

The centre-right Conservatives, led by David Cameron, won most seats in parliament but fell short of a majority.

Labour, in power since 1997, came second and the Liberal Democrats, led by Nick Clegg, a distant third. It is the first time since 1974 that a British election has put no party in overall control.

Brown's announcement could make it easier for Labour to lure the Lib Dems away from the Conservatives, since Clegg had signalled strongly during the election campaign that he did not wish to keep the unpopular Brown, 59, in office.

"Mr Clegg has just informed me that while he intends to continue his dialogue that he has begun with the Conservatives, he now wishes also to take forward formal discussions with the Labour Party," Brown said, adding that he would facilitate that.

"I have no desire to stay in my position longer than is needed," Brown said.

"As leader of my party I must accept that that (the election result) is a judgment on me. I therefore intend to ask the Labour Party to set in train the processes needed for its own leadership election," he said.

Brown did not give a precise time frame for his departure but said he hoped a new Labour leader would be in place by the time of the annual party conference, which is scheduled for late September.

Clegg's choice

Clegg said Brown's decision "is an important element which could help ensure a smooth transition to the stable government that everyone deserves".

Clegg called negotiations with the Conservatives "very constructive" but said that in the absence of an agreement, it was in the national interest for the Lib Dems to talk to Labour as well, in parallel with the talks with the Conservatives.

Either choice is fraught with difficulties for Clegg. The election gave the Conservatives a more convincing mandate than Labour's, but the Lib Dems and the Conservatives are far apart on many key issues.

On the other hand, keeping Labour in power after its poor election result would be awkward for the Lib Dems. Even combined, the two parties would still fall short of a majority and would require support from other small nationalist parties.

Many politicians have said it would be undemocratic for another Labour figure, who was not a candidate to be prime minister during the election campaign, to take over the running of the country.

"I think it (Brown's departure) makes it much more possible for the Lib Dems to do a deal with Labour. It throws a massive spanner in the works for the Conservatives," said Julia Margo, director of research at the left-leaning Demos think-tank.

"It's going to be a very messy government whichever way you play it. Another election in October is what I've got my money on."

Britain's sterling currency fell and government bond futures hit a session low after Brown's comments. Markets had been hoping for a quick deal between the Conservatives and Lib Dems and will not relish the prospect of further delays as parallel talks take place between the Lib Dems and Labour.

"This twist is disappointing for markets which want a quick resolution to this uncertainty," said David Owen, chief European financial economist at Jefferies securities and investment banking group.

"Markets were keener on the idea of a Tory (Conservative) government with Lib Dem support, largely because there is a perception they would cut the deficit sooner."

Britain's budget deficit is running at over 11 percent of national output, raising fears that the country could lose its top-notch credit rating and get into debt difficulties. The markets want to see quick and aggressive action on the deficit.

The three main parties agree that the deficit should be tackled, but disagree about the timing. The Conservatives say they would start immediately, while Labour and the Lib Dems say they would wait until a fragile recovery was consolidated.

Brown's decision to step down is an extraordinary move from a dogged politician. He was a powerful finance minister for 10 years when Tony Blair was prime minister, but it was an open secret then that Brown wanted the top job.

Relations between the pair were famously tense and at long last, Blair stood aside for Brown in 2007, during his third term. Last week was the first time Brown had led Labour into an election.