OK, let’s try a bit of amateur punditry.
The election results seem to put the tories ahead but short of a majority. What should and will each party do for its own interests, and for the country’s interests (for that is surely the order of priorities).
Labour seems to think it has nothing to lose, and wants an all-but-tory coalition. Nick Clegg has rightly told them where to go: who would want to get the blame for keeping Lab in office, no matter what the reward? I expect Lab’s attitude may change quite quickly, especially if they remove Brown (though that’ll be a tortuous process if he doesn’t go voluntarily, and it might be in their interests to keep him and blame the tories for the demise of “the recovery”).
That leaves options of a tory minority government or a tory-led coalition. The latter would almost certainly have to include labour and/or libdems for the numbers to work. I’m predicting they’ll try a minority government. And it’ll work, for a while.
In particular, I wouldn’t foresee a tory-libdem coalition. The issue of electoral reform looks like a showstopper for that. But it could suit the libdems to let the tories govern and take the blame for economic chaos to come. That means they’ll want to avoid anything that would give them cause for an early election, 1974-style. A “gentlemens agreement” at daggers drawn.
On that premise, the way could be pretty-much clear for a stable minority government for some time. That leaves the question, will the Tories try it? They’ve hinted that they will, and if they judge they can get away with it, it seems likely.
Another possibility could be a “government of national unity”. Unlikely, but if the markets pull the plug quickly enough then all bets could be off. Markets that have been giving us benefit of the doubt in anticipation of a new government.