BREAKING NEWS: Brown sacrifices himself and promises to quit as PM in last-ditch bid to do deal with Lib Dems Last updated at 5:35 PM on 10th May 2010 Brown declares he will stand down as Labour leader He'll stay as PM until leadership contest concludes Labour now in formal talks with Lib Dems over deal Cameron was on brink of power until Clegg met his MPs Gordon Brown today sacrificed himself in a last-ditch attempt to keep Labour in power. In a dramatic statement on the steps of Downing Street, the Prime Minister announced he was standing down as Labour leader and calling on the party to launch a leadership election. He said he would not stand again and wanted a new leader to be in place in time for the autumn party conference, leaving him as a caretaker Premier for several months. The extraordinary move is a desperate attempt by Labour to block a coalition deal between the Tories and the Lib Dems, which just hours ago looked imminent. Mr Brown revealed Labour is now pressing ahead with 'formal discussions' of its own with the Lib Dems following a request by Nick Clegg this afternoon. The extraordinary development came after two cloak-and-dagger meetings between Mr Clegg and Mr Brown in the last 24 hours. The Cabinet will meet tonight as a formal negotiation process is set up. The Prime Minister said: 'The reason that we have a hung parliament is that no single party and no single leader was able to win the full support of the country. 'As leader of my party, I must accept that as a judgment on me. I therefore intend to ask the Labour Party to set in train the processes needed for its own leadership election. 'I would hope that it would be completed in time for the new leader to be in post by the time of the Labour Party conference. I will play no part in that contest, I will back no individual candidate.' He's off: Gordon Brown outside Downing Street today where he said he was quitting as Labour leader Britain is now facing the possibility of being saddled with another unelected Prime Minister in the same way as the cosy deal that saw Mr Brown take over from Tony Blair three years ago. It came after David Cameron's hopes of seizing power were dramatically stalled when the Lib Dems demanded further concessions and made clear they could still side with Labour. Con-Lib talks were plunged into doubt after leader Nick Clegg spent two-and-a-half hours with his parliamentary party, who made a series of fresh demands to put to the Tories. David Laws, one of the Lib Dem negotiating team, said the party wanted more 'clarification' on education funding, fairer taxes and its key aim of voting reform. The development came shortly before Mr Cameron was due to address his own backbenchers, when he will face a battle to convince Tory Right-wing of the benefits of an alliance. Senior Lib Dems predicted an agreement was unlikely by the end of the day but possibly by the end of the week. This risks turmoil on the markets which - although currently buoyed by the Greek bailout agreed in Europe - will be unlikely to approve of the current impasse stretching out much longer. And it will raise the prospect of Mr Cameron choosing to go it alone and attempting to run a minority government then call another general election before the year is out. Mr Laws said the parliamentary party had agreed forming a 'strong stable government in the national interest' with reducing the deficit at it heart was the top priority. But although they regarded proposals discussed with the Tories as 'good progress', they demanded 'clarification' about education funding, fairer taxes and the party's key aim of voting reform. 'The parliamentary party has also agreed that the leader will continue to listen to representations that are coming from the leader of the Labour Party,' he said. He added: 'We are very, very conscious of the need to make these decisions quickly but we also want to be sure we get these matters right' Dejected: Gordon Brown and Lord Mandelson leaving Downing Street from the rear entrance this morning The declaration leaves Mr Brown as a 'squatter' in Number Ten and will provide Labour a glimmer of hope that it could yet stay in power. It came hours after the Prime Minister held his second summit with Nick Clegg in 24 hours. After first talking to senior lieutenants Ed Balls and Harriet Harman, he left with Lord Mandelson. Slumped in his seat with his eyes downcast, he looked dejected as they slipped away from the back of Downing Street. Within an hour, he was back and had a face like thunder as he went inside. Momentum had seemed to be building behind a Con-Lib belt-tightening economic plan to shore up international confidence in Britain from the word go today. Talks resumed at 10am but after just 90 minutes, William Hague emerged to say there had been 'further progress' and headed off to report back to David Cameron. Moments later, the Lib Dem team also left the Cabinet Office, declared the two sides are 'working well together' and rushed to meet with their leader Nick Clegg to discuss the latest developments. Mr Cameron then moved the meeting of his shadow cabinet forward by two hours to 2pm. Face like thunder: Gordon Brown returning back to Downing Street after a second meeting with Nick Clegg Europe's bailout of Greece saw the markets soar - giving negotiators in Whitehall valuable breathing space as they attempt to thrash out a deal that will determine Britain's future. The fact that the latest Tory-Lib Dem summit ended after just an hour-and-a-half was being taken as an indication that a broad agreement may already be in place. At their meeting, Mr Brown is said to have been warning Mr Clegg he cannot rely on the Tories to help solve the economic crisis gripping Europe because the party is so Eurosceptic. Lord Mandelson's presence at his side for the meeting is yet more proof that he is controlling moves inside the Labour camp as it contemplates moving into opposition. Mr Clegg, under pressure from his anti-Tory Left wing, is believed to have given himself another 24 hours to agree a deal before telling the Tories to form a minority government instead. The Tory leader and Nick Clegg spoke for 30 minutes first thing today in a 'positive and constructive' exchange then met face-to-face later in the morning. Mr Cameron, as he left home and headed to Westminster for what could be his last few hours before becoming Prime Minister, was upbeat but tight-lipped. 'I am always positive,' he said. The Lib Dem leader, outside his home shortly afterwards, stressed that both sides are working 'flat out and round-the-clock' to forge a pact and get a new government in place. 'I don't think a prolonged period of uncertainty is a good thing. That's why we want to arrive at a decision as soon as possible,' he said. 'But I hope people equally understand that it would be better to get the decision right rather than rushing into something which won't stand the test of time.' 'I hope people will bear with us a little bit longer', he added, as he again reiterated that his key priorities are stabilising the economy, tax, schools and political reform. Both leaders face a battle to sell any deal to their grassroots. Mr Clegg is still with his party after arriving at the Commons meeting at around 1.30pm. The Lib Dem Federal Executive will then gather at 5pm. Mr Cameron, still with his shadow Cabinet, is set to address the parliamentary party - known as the 1922 Committee - at 6pm. The two teams of negotiators spent more than six-and-a-half hours in discussions yesterday as they worked to end the political paralysis facing Britain following the uncertain General Election result. William Hague, for the Tories, insisted it was all 'going well' as he arrived for renewed talks shortly before 10am this morning. 'We're meeting now to discuss some specific ideas and proposals. We're optimistic about making further progress very soon,' he said on the steps of the Cabinet Office. Before midday, both teams headed to their respective headquarters to fill in their leaders on the latest - sparking bizarre scenes as they raced across Westminster followed by hordes of reporters. Mr Hague said: 'We have made further progress in our meeting with the Liberal Democrats this morning. We are now going to report back to David Cameron again, and have meetings with our parliamentary colleagues. The negotiating team are working really well together.' Mr Clegg's chief of staff Danny Alexander gave a virtually identical statement minutes later. 'We are working well together. Good further progress has been made and I'm now going to report on that to Nick Clegg and my parliamentary colleagues,' he said. Talks: William Hague, Oliver Letwin and George Osborne arriving for the latest negotiations New deal? Lib Dems Danny Alexander, Chris Huhne and David Laws outside the Cabinet Office So far, the markets - buoyed by EU chiefs finally agreeing the Greek bailout late last night - seem happy to give the parties more time. The FTSE-100, which saw losses of £35billion on Friday after the election returned a hung parliament, soared by more than 200 points or almost 5 per cent after a crunch European summit finally bore fruit. But if the Con-Lib negotiations falter, and the political chaos lasts more than another couple of days, there could be fresh investor panic. And although the Greek deal is positive in terms of market turmoil, it throws up the thorny issue of the European Union on which the Tories and Lib Dems have wildly differing stances.