Published: May 11, 2010 10:39 AM EDT

LONDON (AP) - Britain's pivotal third party kept its larger

suitors - and the electorate - hanging Tuesday, opening formal

negotiations with Prime Minister Gordon Brown's Labour Party to

form a new government after talks with the rival Conservatives.

Five days after an election that produced no outright winner,

the third-placed Liberal Democrats were playing hardball in hopes

of extracting maximum concessions in return for propping up a

Conservative or Labour administration.

Brown's dramatic decision Monday to announce his impending

resignation opened the way for a possible deal with the Liberal

Democrats - who had demanded his removal as a condition for any


Both of the two main political parties have now offered to meet

the Liberal Democrats' key demand - electoral reform - muddying the

differences between the two offers.

Conservative leader David Cameron appeared miffed at the sudden

turn of events, which came after both the Conservatives and the

Liberal Democrats claimed to be making progress Monday in their

coalition talks.

"It is now, I believe, decision time," Cameron said early


Cameron's Conservatives - who won the most seats in Parliament

in Thursday's national election but fell short of capturing a

majority - have struggled in their attempts to win over the Liberal


Though the Liberal Democrats appeared genuinely open to a deal

with the Conservatives, they are more ideologically compatible with

Labour. Brown's offer to resign could give Liberal Democrat leader

Nick Clegg a viable chance at passing electoral reform and a role

in the British government after years on the political fringe.

Yet such a move could be seen by many as an affront to the will

of the people, who gave the center-right Conservatives 306 of

Parliament's 650 seats - just short of the 326 needed for a

majority. Labour won 258 seats, Liberal Democrats won 57, and

smaller parties took the rest.

A Labour-Liberal Democrat alliance would also be weak because it

would need the support of other minor parties in order to rule.

Clegg said Tuesday he was "as impatient as anyone else" to

resolve the political impasse and said he hoped to make an

announcement "as quickly as we possibly can."

The talks between the Liberal Democrats and the Conservatives

had foundered on the issue of voting reform.

The Liberal Democrats have demanded moving the voting system

toward proportional representation, which would greatly increase

their future seats in Parliament. In the latest election, Liberal

Democrats won almost a quarter of the overall vote but that earned

them only 9 percent of the seats in Parliament.

Most Conservatives are adamantly against voting reform, but the

party made a limited counteroffer to the Liberal Democrats on

Monday - offering a referendum on a less dramatic type of electoral


Still, the talks with the Liberal Democrats left even some

Labour supporters uncomfortable.

Former Home Secretary John Reid said such a pact "would be

mutually assured destruction."

He told GMTV on Tuesday that while such a deal might keep Labour

in power a little while longer, it ran the risk of alienating even

more voters from the party.

"I fail to see how trying to bring together six different

parties - and even then not having a majority - will bring the

degree of stability we need," he said. "It may be perceived as

acting in our own self-interest. The public aren't daft."

While uncertainty prevails, one thing is certain: The career of

Brown - the Treasury chief who waited a decade in the wings for his

chance to become prime minister - is ending.

Brown accepted blame Monday for Labour's loss of 91 seats in

last week's election and its failure to win a parliamentary


No other party won outright either, resulting in the first

"hung Parliament" since 1974 and triggering a frantic scramble

for who will create the next government.

"As leader of my party, I must accept that that is a judgment

on me," Brown said, offering to step down before the Labour party

conference in September.

Monday's drama deepened the postelection limbo that many feared

could further undermine confidence in Europe's financial markets.

The British pound traded at $1.485 Tuesday morning, up from its

overnight low of $1.478 but down from around $1.50 before Brown's