Gordon Brown threw a Hail Mary Pass by offering to resign as the head of the Labour Party in an effort to entice the Liberal Democrats into a governing coalition. But those talks have apparently run aground, with Labour MPs strongly opposed to any deal. In contrast to that squabbling, the Conservatives are very close to inking a deal with the Liberal Dems that would create a strange bedfellows coalition for the near term. According to the Guardian liveblog, Gordon Brown is about to quit as Prime Minister, and the Conservatives will join the Liberal Dems to form a government, with Labour going into opposition. More from the NYT:

A series of development in mid-afternoon suggested that the bid by Prime Minister Gordon Brown to extend Labour’s 13 years in power was collapsing. Mr. Brown was meeting at 10 Downing Street with Labour cabinet ministers and other officials as a succession of senior Labour figures took to the airwaves saying Labour should abandon Mr. Brown’s bid for a pact with the Liberal Democrats and acknowledge that the Conservatives had won the right to govern […]

As Labour hopes of staying in government faded, Conservative spirits rose. David Cameron, the Conservative leader, met again with Nick Clegg, the leader of the Liberal Democrats, and drove after lunch to the Conservative party’s London headquarters to meet with party workers. Having begun the day with grim-faced demand that the Liberal Democrats make up their minds about their coalition partners quickly, Mr. Cameron appeared cheerful, and left the party headquarters smiling, but refusing to make any comment to reporters.

With momentum running towards the Conservatives, reporters were gathering in large numbers at all the points in Whitehall that have been the focal points of the political mayhem of recent days, as politicians of all three major parties scrambling in an effort to put together a government in the wake of last week’s inconclusive election. But the likelihood of Mr. Brown quitting Downing Street to make way for Mr. Cameron in the hours that remained of Tuesday seemed unlikely, since any deal between the Conservatives and Liberal Democrats will have to pass at least two important hurdles, involving meetings of powerful Liberal Democrat groups that have to approve a coalition pact before Mr. Clegg can proceed.

It’s unclear what the terms of the deal will be. But I have to think that the markets tried to put their thumb on the scale by theatening to downgrade the country’s credit rating in the event of a Lib-Lab coalition. I hope we hear more about that – sounds like a clear intervention by the financial elites to influence Nick Clegg and the Liberal Democrats’ decision. It also portends some severe austerity measures to reduce the UK budget deficit in the event of a Cameron PM tenure.

UPDATE: CNBC says it’s a done deal, with Cameron as Prime Minister.

David Dayen

David Dayen

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