Why U.K. election looks like a squeaker

Editor's note: Fareed Zakaria is an author and foreign affairs analyst who hosts "Fareed Zakaria GPS" on CNN U.S. on Sundays at 10 a.m. and 1 p.m. ET and CNN International at 2 and 10 p.m. Central European Time / 5 p.m. Abu Dhabi / 9 p.m. Hong Kong.

New York (CNN) -- With a week to go, the United Kingdom election looks a lot closer than people expected when the campaign began. But the real suspense may lie in what the next prime minister does in office, according to analyst Fareed Zakaria.

After 13 years of Labour governments and a severe recession, Prime Minister Gordon Brown's party was first thought to be facing a clear defeat at the hands of the Conservative Party, headed by David Cameron. But stumbles by the Conservatives and a strong showing in Britain's first televised party leader debates by Liberal Democrat leader Nick Clegg has resulted in a tight three-way race.

Polls show Conservatives hold only a narrow lead over the Liberal Democrats, with Labour in third place, slightly behind.

Complicating the prospects of Brown and his party, the prime minister had to apologize Wednesday for describing a voter he had met as a "bigoted woman" because of her views on immigration. Not realizing he was still wearing a radio microphone, Brown said of his meeting with the woman, "That was a disaster. ... She was just a sort of bigoted woman."

Zakaria told CNN that he suspects Cameron's Conservative Party will get the most seats in Parliament and that he will become prime minister, perhaps with the support of the Liberal Democrats. He said then the real hard choice facing him would be whether to immediately carry out the deep level of budget cuts Conservatives have said the nation needs and risk throwing the economy into a double-dip recession.

Zakaria, author and host of CNN's "Fareed Zakaria GPS," spoke to CNN on Wednesday. Here is an edited transcript:

CNN: For a long time, it looked as if Conservatives had the upper hand after years of Labour governments and would cruise to a strong victory in Britain. But the election has been shaping up as a close three-way race. What happened?

Fareed Zakaria: I think that fundamentally what this points to is that the Tory party still has an uphill struggle from where it had gotten itself to after the Blair victory. After Margaret Thatcher, the rise of Tony Blair and the fact that Tony Blair moved the Labour Party to the center, the Tories were perceived as a combination of strange, weird and mean.

And that image stayed with them, they lost three elections quite handily. ... Labour has been in power for 13 years, Gordon Brown is personally quite unpopular, and David Cameron is frankly an amiable, likable guy and yet it has been very difficult for the Tories to surge ahead.

It just points to the fact that while the Tories have a very solid base, they have not yet been able to create a broad mainstream appeal in modern Britain.

CNN: Some people have noted that unlike the American situation, the British political parties seem to be trying to converge on the center?

Zakaria: I think that's right; there isn't actually that much difference between Labour and the Tories any more. And the Liberal Democrats occupy a sort of strange place, mostly in the center and on some issues further to the left, for example being more pro-European than either of the two big parties. The Liberal Democrats are in favor of Britain adopting the euro and giving up the pound, which neither the Tories nor Labour advocate.

But it is worth pointing out that the big ideological reading of this election would have to be that when you add the Labour party's vote, which is in the low 20s and the Liberal Democrats, which appears to be now in the high 20s, you have clearly half the electorate [that] is left of center. The Tories struggle to get much beyond 30 percent in their best showing.

So it would seem that somewhere between 45 and 55 percent of the electorate is left of center, which tells you where Britain is ideologically. And it also tells you there is a clear opportunity for a left-of-center coalition -- now whether or not it happens because of the peculiarities of the political dynamic and the personal dynamic of the people involved, is another issue ...

CNN: What's at stake if no party winds up with a clear majority of the seats in Parliament?

Zakaria: The British system is a lot like ours in the sense that members of Parliament are elected from individual constituencies and it is a first-past-the-post system, so your national vote does not always translate into the number of seats you have. What's interesting now is that you have the Conservatives running first, the Liberal Democrats second and Labour third.

What you might end up with in Parliament is a situation where the Labour Party ends up with the most seats, the Conservatives second and the Liberal Democrats third. Given that there is that degree of disparity between your average national vote and how that translates in all these various constituencies, it's a little tough to make predictions.

But it is certainly possible that you end up with what's called a hung Parliament with no party able to form a government. And that would mean that Gordon Brown would continue to be prime minister.

But I have to say that my gut is that despite all this, the Conservatives will end up with the single largest share of Parliamentary seats, though less than a majority, and that the Liberal Democrats will reluctantly support them because they will feel some moral obligation to support the party that came in first. If I had to bet right now, I would probably bet that David Cameron will be the next prime minister of Britain.

CNN: And where would he take the country?

Zakaria: The one big issue which the Conservatives have campaigned on is budget cuts to bring the budget into better shape and to do it largely without any tax increases. In order to do that, you would have to do something fairly dramatic on the spending side.

It will be both an interesting test politically and on the economic side: Can a party really engage in that kind of serious budget cutting in a democracy? It's proven difficult in the West in recent years. And the second is: What will the effect be on the still fragile economic recovery?

So it would be a kind of experiment of whether or not you can starting rolling back the fiscal stimulus. Many economists will tell you there is a danger, if you start cutting budgets now -- with the private sector still not in full force -- the British economy could well move into a double dip or a second recession.

CNN: Is this a model at all for the United States, which isn't going to have a dramatic change in the government for a while, at least until the midterm elections?

Zakaria: Usually there has been a kind of broad congruence between Britain and the United States. Right now what is striking is actually the opposite. The British parties are much closer together, whereas the American parties seem quite far apart. Part of that is because the Republican Party is now decidedly a minority party. It does not have to deal with the problems of governing, so it can engage in posturing and positioning itself. Were it to have to get involved in the task of governing, it would have to move to the center.

CNN: If Britain has to cut the budget, is that a model for what the next Congress might have to do?

Zakaria: It raises the same issues and the same challenges. It is important to get the budget into better shape. But the real question is when. If you do it now and you kill growth, that would have a catastrophic effect on the economy . Not only would you stop the economic recovery in its tracks, but you would also have a very adverse effect on the budget.

Remember the most important thing from the point of view of the budget is the level of your tax revenues. And the level of your tax revenues depends entirely on the level of economic growth.

In other words, the difference between the American economy growing 2 percent a year and 3 percent a year is massive in terms of the tax revenues that you will get if you get to the higher level of growth. So anything that you do that kills growth not only has an effect on unemployment but also creates a bigger budgetary hole for you.

The timing of these budget cuts is actually a very, very significant issue. And my own sense is that David Cameron, if and when he gets into government, will be well-advised to take a very long hard look at whether this is the right time to do budget cuts or to wait a while. And I think that come November, if the Republicans come into power in Congress, the same will be true in that case.