UK Brown Resigns, Cameron Becomes Prime Minister

U.K. Prime Minister Gordon Brown resigned late today, paving the way for Conservative leader David Cameron to become the new Prime Minister. Brown went with his wife to Buckingham Palace to tender his resignation to the Queen, who accepted it, a spokeswoman confirmed.Cameron, 43 years old, then headed for an audience with the Queen, where he accepted her offer to form a new government, according to Buckingham Palace’s press office.

That returns the Conservatives to power after 13 years as the main opposition party with Cameron becoming the youngest Prime Minister in almost 200 years.

However, Cameron’s Conservative party looks likely to share power with the Liberal Democrats in what could be an uneasy alliance.

Liberal Democrats’ lawmakers still need to back a formal coalition deal. If they reject it, the Conservatives could rule as a minority government.

Cameron’s party emerged from last week’s election with too few lawmakers to command a parliamentary majority, the first time since 1974 an election ended in a so-called hung Parliament.

Brown, who took over as Prime Minister in June 2007 from Tony Blair after a decade as a powerful chancellor of the exchequer, also said he was stepping down immediately as leader of the Labour Party. That will trigger a leadership election.

Brown’s resignation broke a post-election political stalemate five days after last Thursday’s election. Since Friday there have been around the clock negotiations between the three main parties, centering around the Liberal Democrats, led by Nick Clegg.

The Conservatives and Liberal Democrats met for more than five hours of talks Tuesday afternoon. After those talks broke up, Conservative Foreign Affairs spokesman William Hague said the talks “took place in a positive atmosphere.”

“We now have some recommendations to take back to David Cameron and to our parliamentary colleagues,” Hague said.

The biggest obstacle now to a coalition lies with the Liberal Democrats, with the party leadership needing backing from three quarters of their lawmakers and their governing Federal Executive to approve a deal.

Financial markets reacted positively as a coalition deal started looking likely.

The pound surged on the news with the euro sinking 0.7% to the day’s low of GBP0.8514 initially. It was at GBP0.8497 at 1950 GMT. Sterling also rose against the dollar, lifting to $1.4955. The FTSE 100 closed 1% lower on the day but lifted towards the session’s end.

Prices of U.K. government bonds also jumped, effectively lowering the interest rate the government must pay to borrow in the private markets to 3.89% from over 4% earlier Tuesday. The extra premium the U.K. needs to pay investors to buy its bonds instead of Germany’s has dropped to 0.95 of a percentage point from 1.1 points Tuesday.

While the Liberal Democrats and the Conservatives have been in power sharing talks since Friday, Clegg’s party asked to start formal talks with Brown’s Labour party Monday, adding to the political uncertainty.

Brown said Monday he would be stepping down as party leader and head of government to facilitate a “progressive coalition” with the Liberal Democrats. But he said he would not leave for some weeks if a Labour-led coalition was agreed.

However, Labour lawmakers said the talks between Labour and the Liberal Democrats didn’t make much progress.

Jim Fitzpatrick, the government’s farm minister, told The Wall Street Journal he had heard from within the Labour Party that a deal with the Conservatives and Liberal Democrats was now more likely and that talks between his party and the Liberal Democrats hadn’t taken off.

“The Liberals played us quite smartly, kept us in the wings to keep the Tories keen,” he said.

Thursday’s general election left Cameron’s Conservatives as the largest in Parliament, with 306 seats, compared with 258 for Brown’s Labour party. A party needs 326 seats to form a majority government.

With 57 seats, the Liberal Democrats could guarantee a Conservative-led government a majority but they couldn’t deliver a majority for Labour, who would also need to win backing from other, smaller parties.

{Wall Street Journal/Noam Amdurski-Matzav.com Newscenter}