Leader: When agreement is reached a poisoned chalice awaits

EVEN in normal circumstances the pressure on senior political leaders to reach a workable agreement to deal with a hung parliament is immense. But these are not normal circumstances. They are edging towards a pressure cooker extreme as financial markets anxiously await the result. Talks between the Conservative and Liberal Democrat negotiating teams were described yesterday as "very positive and productive". That is encouraging, bearing in mind the large areas for disagreement. The mo

What of other pressing reforms to the electoral system such as greater equality in the size of the constituencies? Even in the one area of voting reform alone there is much to be clarified before a deal can be struck. And then there is the inbuilt aversion of many Lib Dems, supporting as they do a left of centre party, to a pact with the Conservatives.

Can such an aversion be so readily overcome? If talks fail here, what scope is there for a progressive coalition, either under Gordon Brown or a new Labour leader not yet chosen? Would the public accept a prime minister who has been defeated? Even if Mr Brown were to survive in the premiership, it is hard to see how such an arrangement would be seen as legitimate other than for a few short months until a second election in the autumn.

These are major questions requiring ample time and cool heads. But a financial market clock is also ticking. Over the weekend there has been mounting concern over major renewed turbulence in financial markets today if no agreement is seen to be in sight. The negotiations coincided with an emergency meeting of the 27 finance ministers of the European Union yesterday.

Failure to agree a credible strategy to deal with fears of debt market contagion could see a further assault on the euro. A bold statement is considered vital. But with the UK in no position to commit itself to participation in any EU-wide scheme – even a relatively modest 50 billion finance for emergency loans for stretched eurozone members – markets could nose-dive.

And with the UK, on European Commission reckoning, to have the highest deficit-to-GDP ratio of any country in the EU, the risk of UK financial assets being caught in a major market maelstrom is considerable.

The irony of all this is that, whatever coalition combination is reached, or none at all, Britain's new government will immediately step into the tightest financial strait jacket in 80 years.