Bill Jamieson: Why there will be no winners after today

• Will anyone sweep to power? With so many constituencies finely balanced the outcome is difficult to predict. Picture: PA

"Winner"? "Victory"? To the winner is handed the most poisoned chalice ever bequeathed to an aspiring UK prime minister – a record peacetime budget deficit, spiralling government debt, an economy struggling from a near-death experience and financial markets in turmoil.

"Winner"? "Victory"? This is the day we wake up to a reality suspended during three frenetic weeks of political campaigning, in which all three main contenders failed to provide a full explanation of where spending cuts would come – and the SNP insisted there should be no cuts at all.

Yet the debt interest bill alone this year will top 40 billion (that's 4.5 million every hour of every day). And it is heading over three years to hit 74bn.

"Winner"? "Victory"? The news pushed to the sidelines this morning is of Greece in uproar over its austerity programme, with three deaths, banks on fire, tear gas, riots and mayhem.

Across Europe, markets are in turmoil, the euro falling 3 per cent in three days and bond investors scrambling out of Portugal as a top ratings agency puts the country's sovereign debt on negative watch. "Contagion" is the reigning fear. And it is sweeping all before it.

"Winner"? "Victory"? Yesterday the European Commission turned a searing light on the UK's public finances. It expects our budget deficit to be 12 per cent of national income this year – the highest of any EU country. Ireland is placed second at 11.7 per cent of GDP.

In addition, the European Commission expects the UK will have the largest underlying deficit on three critical measures. "It will be hard," says Citigroup UK economist Michael Saunders, "to establish a credible path back to fiscal sustainability."

With markets in such a febrile mood, the UK will have only a short period to sort out a new administration and come up with a credible deficit reduction plan before the pound is dumped around the world.

The point is made with blazing urgency by the historian Niall Ferguson in a major article in the Spectator this weekend – calling for the new administration to call in the International Monetary Fund.

"We are in the middle," he writes, "of the worst debt explosion in the western world… and nothing discussed during the election campaign would remotely suffice to bring the situation under control.

"On the contrary, there is a very real danger that it could now spiral, Greek-style, out of all control if foreign confidence in sterling slumps and long-term interest rates rise."

The new UK prime minister, he warns, must tell his chancellor "to wield the axe ruthlessly… At the same time, he needs to initiate talks with the IMF in case external support proves to be necessary…

"We are back not just in 1979, but in 1976, the last time the IMF had to bail Britain out as a consequence of Labour's mismanagement."

The real history made today will not be in front of the TV cameras. Teams of senior civil servants will put the finishing touches to options for the biggest round of spending cuts envisaged in the UK for 80 years.

In the event of a hung parliament, three top mandarins will be in charge of developments tomorrow: the Cabinet Secretary Gus O'Donnell; the Downing Street Permanent Secretary Sir Jeremy Heywood and the Private Secretary to the Queen, Robert Geidt. Secret meeting places for cross-party negotiations are believed to have been prepared.

The Treasury, in particular, will be urging delay and uncertainty to be kept to a minimum. Bank of England Governor Mervyn King will also be on call.

It is not a hung parliament global investors fear, but the prospect of a prolonged period of indecision… and the need for a second election soon if the outcome of this election battle is a fragile coalition government or one with a tiny majority.

The need for an early Budget is now critical to the country's financial credibility. The option of waiting for a spending review in the autumn is already as good as dead.

The key reason is that public-sector net debt now stands at 890bn. The willingness of investors to buy UK government debt is at risk if current debt trends continue.

Budget action is now a compelling priority and will almost certainly involve the establishment of a high-powered group of independent experts to advise the Cabinet on where billions of pounds of expenditure reductions can be made.

And the timetable for action will be short.

The deepest fear in the Treasury and at the Bank of England is that the UK will be caught up in the financial storm now raging across the eurozone. Fears that the debt crisis may spread beyond Greece knocked the euro and rattled bond markets in Portugal and Spain as anxious investors fled into the US currency.

The euro plunged to its lowest against the dollar since March last year as German chancellor Angela Merkel warned the debt crisis could spread if a 110bn (94bn) Greece rescue plan does not succeed.

"We're at a fork in the road," she said yesterday. "This is about nothing less than the future of Europe – and with it, the future of Germany in Europe."