SCENARIOS-Will Britain's Prime Minister Brown survive?

By Sumeet Desai

LONDON, June 8 (Reuters) - British Prime Minister Gordon Brown is facing a potential challenge to his leadership after support for his Labour Party plunged to its lowest level in a century in European elections. [ID:nL8408990]

Another junior minister resigned on Monday, saying she could no longer support the prime minister, after six Cabinet ministers quit last week and Brown reshuffled his government team in a bid to maintain his grip on power.

While Brown has survived the attempts to topple him so far, his next big test is a meeting of the parliamentary Labour Party later on Monday (1700 GMT).

The following questions and answers look at what might happen next and the possible implications.

WILL GORDON BROWN STEP DOWN?

Brown is very unlikely to step down. He said on Friday that he would not walk away and for now has the support of senior ministerial colleagues regarded as potential challengers.

He argues that the last few weeks and months have been difficult for all political parties because of an expenses scandal that has dominated British politics and that he is the right person to lead the country through the economic crisis.

WILL HE BE FORCED OUT?

Probably not right now. Twenty percent of the parliamentary party, some 70 lawmakers, is needed to force a leadership contest. While there have been claims that more than 50 lawmakers would be prepared to call for a contest, few have stuck their neck out.

Brown's position was looking a lot more precarious last week when work and pensions minister, James Purnell, quit on Thursday night and called on him to go in order to help Labour's prospects in a general election due within a year.

But potential challengers such as David Miliband, the foreign minister, and Alan Johnson, now interior minister, rallied behind Brown, shoring up his position.

Forcing Brown out is highly likely to bring forward the timing of a general election. Labour looks sure to lose very badly to the opposition Conservatives, giving little incentive for any challengers to step forward.

SO WHAT HAPPENS NEXT?

Most likely Brown will stay as leader and wait until May 2010 to call an election -- he still has a significant majority in parliament -- but his waning authority may make it harder for him to push through reforms or laws that are in any way controversial.

WHAT DOES THAT MEAN FOR THE INVESTOR?

The pound has been taking a battering on the foreign exchanges because of the political uncertainty. A shoring up of Brown's position could give it a small boost.

Any sign that he will have to go may keep the pressure on the currency. Longer-term UK assets are only likely to be affected if expectations of a clear victory by the opposition Conservatives in the next election were seriously undermined. (Editing by Louise Ireland)