Prime Minister Helen Clark faces a dilemma: sack New Zealand First leader Winston Peters as Minister of Foreign Affairs or face a growing perception she is prepared to hold on to power at any cost.
National Party leader John Key raised the stakes yesterday saying Mr Peters would be unacceptable as a minister in a government led by him unless Mr Peters could provide a credible explanation of the "Owen Glenn saga".
Imminent opinion polls are expected to show that Miss Clark's continued support for Mr Peters has hurt Labour and is damaging her chances at the forthcoming election.
The longer Miss Clark ties herself to the fortunes of Mr Peters, the more she could be handing the election to National.
And yet, if she does sack him, the potential damage to his standing could seal Mr Peters' political future and scupper any chances he has of making it back into Parliament.
In that case, Labour is unlikely to be able to count on NZ First as a coalition partner after the election and would be less likely to be able to form a fourth-term government.
Labour did everything it could to protect Mr Peters in Parliament yesterday, delaying question time through Police Minister Annette King reading a ministerial statement on the police use of tasers.
National was outraged and continually questioned Speaker Margaret Wilson on her various rulings.
When Mr Key finally got to ask Miss Clark whether she continued to retain confidence in Mr Peters, the Prime Minister replied she did and deflected questions on the issue of whether Mr Peters personally solicited a $100,000 donation from expatriate billionaire Owen Glenn.
Mr Peters repaid Miss Clark by later in the day supporting the Government's emissions trading scheme, ensuring it will be passed before the election.
Miss Clark has made no secret that she regards the scheme as a cornerstone election policy for Labour.
The difficulty for the Prime Minister is that the privileges committee is due to sit again next week to consider the issue of donations, and in particular whether Mr Peters broke Parliament's rules by failing to declare Mr Glenn's donation.
The committee is chaired by National Party MP Simon Power.
If the committee rules against Mr Peters, Miss Clark will be left with no alternative but to stand down the minister.
The scene had been set for an explosive session earlier in the day with a letter from Mr Glenn asserting that Mr Peters had personally solicited a $100,000 donation.
Mr Peters countered that Mr Glenn had key facts wrong.
Mr Key told a press conference that Mr Glenn's letter represented a direct challenge to Mr Peters' credibility from the only other person in the world in a position to know the facts.
"Unless he can provide a credible explanation about this serious issue, he should be unacceptable to Helen Clark as a minister . . ."
However, Finance Minister Dr Michael Cullen criticised Mr Key for being unable to take a firm position, even when he "grandstands".
"Mr Key showed up to the press conference and backed away from a firm position, saying that Mr Peters might be able to serve in a future National government if he comes up with a good explanation."
Miss Clark had made it clear she was waiting on the outcome of the privileges committee which would examine the conflicting evidence presented to it.
Mr Key attacked that position in the House then called a press conference to announce he held the exact same position, Dr Cullen said.
