What's next for U.K. after election?

A woman takes a copy of the election day edition of the Evening Standard newspaper in London.

TEXT OF INTERVIEW

Kai Ryssdal: White House press secretary Robert Gibbs said this afternoon President Obama is not worried about who's going to be the next British prime minister once the dust has settled from yesterday's election. The two big parties -- that'd be Labour and the Conservatives -- are trying to put something together with the third-place Liberal Democrats and tackle the British economy.

We've got Marketplace's Stephen Beard on the line now from London. Hello Stephen.

Stephen Beard: Hello Kai.

Ryssdal: The politics of this, if you would Stephen, and then, what's behind it, would you?

Beard: What the Liberal Democratic Party really wants from the Conservatives in order to form a government is a major reform of the voting system. If they don't get it, they're going to be very reluctant to join in the next government, because the next government is going to be tricky. It's going to be very difficult. It's going to have to make some really unpopular cuts in public spending to reduce the U.K.'s absolutely massive budget deficit. Anatole Kaletsky, who's the chief economics commentator at the Times, says the Lib Dems are going to need a big reward to tempt them into office.

Anatole Kaletsky: I think the Lib Dems will only go for a deal like this if they are given a cast-iron guarantee on a change in the electoral system. If they don't get that change in the electoral system, then essentially they will be cutting their own throats by joining a Conservative government.

Ryssdal: I'll go back to the piece that you filed for us on Monday, Stephen, setting up this election where you pointed out that the governor of the Bank of England, Mervyn King -- sort of the Ben Bernanke equivalent -- said whoever wins this election is going to be out of power for a generation, because the cuts that they're going to have to make are going to be so deep.

Beard: That's right. I mean, you've got a whole range of independent analysts and economists saying that we are talking about absolutely huge public sector job losses, as many as half-a-million jobs may have to go. There are going to be big cuts in welfare benefits and some tax rises. So, not only is this going to be particularly popular with the British electorate, especially since during the campaign, all the parties rather played down the severity of the cuts, which most people say will be necessary.

Ryssdal: Is there not though, Stephen, a flip side to the virtues of a hung Parliament? That is to say, because the budget cuts are going to have to be so serious, isn't it a good thing that people are going to have to work across party aisles, if you will, to get this government formed?

Beard: Yes. There's no doubt it's going to be easier if you have more parties sharing the blame. If it became like a kind of government of national unity during wartime, the trouble is the only opposition party with enough votes to give the Conservatives a majority are the Lib Dems. And as we've heard, they simply don't want to suffer the unpopularity of being in government, unless they get this prize of voting reform, which the Conservatives are rather reluctant to concede. So we've got a stalemate.

Ryssdal: Is there any European reaction today in terms of the euro or the markets or any of that?

Beard: Well, the financial markets don't like uncertainty. The pound fell quite sharply against the dollar this morning. Obviously, the sooner we know who is going to lead the country, the better. But oddly enough, actually, the turmoil in the eurozone may be a blessing in disguise for Brits, because it is perhaps deflecting some of the speculators fire away from the U.K.

Ryssdal: Never thought we'd hear praise for the Greek debt crisis, right? What kind of timetable do we have here, Stephen?

Beard: Well, theoretically, these negotiations between the Conservatives and the Lib Dems can go on until the last week of May. But nobody really believes this vacuum could continue that long. The Conservatives are going to be negotiating pretty hard with the Lib Dems over the weekend. The feeling is that the pound and the British government bonds could take quite a hammering if we don't know precisely who's going to form the next government by the middle of next week.

Ryssdal: From London, Marketplace's Stephen Beard. Thank you Stephen.

Beard: OK Kai.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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