* Year-long inquiry into UK press to disclose findings
* Could recommend new newspaper watchdog backed by law
* Lawmakers divided, PM Cameron trapped in the middle
* Deputy PM Clegg to make separate statement after PM
By Michael Holden and Kate Holton
LONDON, Nov 29 Prime Minister David Cameron
faces a no-win dilemma on Thursday when a far-reaching inquiry
into British newspapers delivers its verdict on how to curb the
excesses of the country's notoriously aggressive press.
Cameron, who was embarrassed when toe-curling details of his
cosy texts to one of media tycoon Rupert Murdoch's lieutenants
emerged at the inquiry, will have to decide whether to accept
its findings and anger a hostile press and many in his own
party, or reject them and risk dividing his coalition
He will also be conscious of the weight of expectation from
a public that was scandalised to learn that journalists hacked
the phones of victims of crime, wined, dined and paid police for
leads and were in constant touch with senior politicians.
Cameron will give his response to the House of Commons after
the report is published at 1330 GMT, under scrutiny from
high-profile figures such as Hollywood actor Hugh Grant who have
campaigned for a clampdown on an industry they say ruins lives.
The issue has divided the cabinet and could put the prime
minister at odds with Nick Clegg, the leader of the junior
Liberal Democrat partners in the coalition government.
Following talks between the leaders on Thursday, a Liberal
Democrat source said Clegg would deliver his own statement to
parliament after Cameron, implying that the two disagree on the
way forward. However the source played down suggestions of a
major breach in the coalition.
The inquiry was ordered by Cameron following public outrage
at Murdoch's now defunct News of the World, a News Corp
tabloid whose journalists hacked the phone messages of missing
schoolgirl Milly Dowler, who was later found dead.
Exposing the close ties between political leaders, police
chiefs and press barons, the inquiry revealed the "dark arts" of
journalists seeking ever more salacious stories in a bid to hold
up dwindling circulation figures.
Huge attention will be focused on whether Lord Justice Brian
Leveson, one of Britain's top judges, recommends a new body to
regulate the press with powers enshrined in law, or merely says
the existing system of self-regulation should be overhauled.
He could also criticise Cameron's government, including one
of his most senior ministers, Jeremy Hunt, for close ties to
Murdoch's News Corp and their handling of the company's
aborted bid to take control of pay-TV group BSkyB in
what would have been its largest acquisition.
The press, backed by some 80 members of parliament, has
lobbied hard for Cameron to resist calls for legislation,
arguing it would curb freedom of speech and mean newspapers
requiring state approval for the first time since 1695.
"For today Britain stands at a crossroads," Murdoch's Sun
tabloid said in its leader column. "In one direction: Official
control of papers, with state sensors approving stories. In the
other direction: A free press under stricter self-governance."
However, a similar number of lawmakers, as well as academics
and celebrities, favour statutory regulation, and opinion polls
suggest the public agrees.
A poll for the BBC said two thirds of people do not trust
newspapers to tell the truth, while almost half want the
industry to be regulated by a body backed by the courts.
"The status quo is unacceptable and needs to change,"
Cameron told parliament on Wednesday. "This government set up
Leveson because of unacceptable practices in parts of the media
and because of a failed regulatory system."
Some media have speculated that Cameron will give the press
one last chance to get its house in order even if Leveson backs
a new law.
Under the watchful eye of Leveson, celebrities including
Harry Potter author JK Rowling, singer Charlotte Church,
Dowler's parents and other Britons who found themselves in the
media spotlight, told the inquiry how they had been harassed,
bullied, and traumatised by the press.
Four prime ministers including Cameron were also quizzed in
great detail about their links to newspaper owners, especially
Murdoch, who himself endured two days of grilling, during which
he denied playing puppet-master to those running the country.
The inquiry heard intimate emails and text messages between
Cameron and Murdoch's top lieutenant Rebekah Brooks, who goes on
trial next year over the alleged phone hacking.