Clegg smooths City fears of election deadlock

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Liberal Democrat leader Nick Clegg moved today to reassure investors fretting over the prospect of political stalemate in Britain following the upcoming general election.

The pound slumped to its lowest level for 10 months against the dollar on Monday after polls suggested a hung parliament was likely, raising fears of a delay in tackling the UK's debt mountain.

Mr Clegg's party would likely have a pivotal role if no overall victor emerged and he used an interview with the Financial Times to say the Lib Dems would act as the "guarantors of fiscal stability".

He said: "I think people are entitled to expect a sensible, stable government at a time when the country is facing very, very acute choices.

"We take what the markets are worrying about immensely seriously.

"We will not take any risk with the creditworthiness of the economy."

Mr Clegg said in the event of a hung parliament he would try to find a working arrangement with a minority administration led by David Cameron or Gordon Brown.

"I think stability is so important that people are entitled to expect they are not going to be constantly asked to go back on a dreary Thursday afternoon to vote again and again and again," he added.

The pound showed little sign of a revival yesterday after Monday's fall which took sterling down through the psychologically important 1.50 barrier, to 1.478 dollars.

Pressure has been brought to bear on the currency amid fears in the City that a hung parliament will produce a weak government that will be unable to take the action needed to reduce the UK's £178 billion deficit.

Experts have warned that sterling will remain on the rack until the general election.

An opinion poll on Sunday put the Tories lead over Labour at just two points, down from double figures just months ago.

The latest daily poll for The Sun today showed the Conservative lead down to 5%.

The YouGov survey put Tories on 38% (down one point since yesterday), Labour on 33% (up one point) and Liberal Democrats on 16% (down one).