A remarkable turn of events. Here are some early thoughts:
1) A lesson in never underestimating Brown. His timing could have been no better in placing maximum pressure on the Tories. This will test Cameron’s nerve like nothing else. Is he willing to make the ultimate sacrifice on electoral reform to take power? Will the MPs buckle at the 6.30pm meeting? Is power worth 25 Tory seats at the next election (which is the price of AV)?
2) This is the first formal talks with Labour. But the discussions are well advanced. The word is that the Labour team is made up of Lord Adonis, Lord Mandelson, David Ed Miliband and Ed Balls (a mix of the young pretenders and the unelected).** The big question is whether any Labour accommodation could be “strong and stable”. And what voting reforms deliverable before the next election, which could come within months.
3) The Lib Dems think the Euro bailout has won them some negotiating time. The positive market moves this morning certainly strengthened the hand of the old SDP-wing that want all options with Labour properly explored. Let’s see what happens tomorrow morning — I doubt whether the markets would have priced in the prospect of serious talks with Labour.
** Moves afoot to add Harriet Harman to the team