LONDON (Reuters) - Prime Minister David Cameron may survive the phone hacking scandal around Rupert Murdoch's media empire, but his standing has been damaged and already shaky public trust in the political, business and media establishment has been weakened further.
The scandal over allegations that journalists at Murdoch's News of the World tabloid illegally accessed the phones of murder victims and families of soldiers killed in action have led to the paper's closure and the resignation of some of Murdoch's top lieutenants, as well as Britain's police chief.
Cameron's judgement has been questioned after he hired the paper's former editor, Andy Coulson, as his press chief and his relationship with Rebekah Brooks, who quit as chief executive of Murdoch's British newspaper arm, is now widely seen as too cosy.
With a second senior police officer quitting on Monday and new developments in the story breaking by the hour, predicting where it may go next has become all but impossible. If Cameron is unlucky, analysts say, it may define his premiership.
Cameron, 44, has shortened a visit to Africa to deal with the crisis and said parliament would delay its summer recess to enable him to address lawmakers on the scandal.
"There will be some pressure on Cameron but this goes well beyond him," said David Lea, western Europe analyst at London-based consultancy Control Risks.
"This wraps in the whole establishment -- the most serious allegations are probably those involving the police... It isn't going to bring the government down but it isn't going to be forgotten either."
Lea said Cameron would find it hard to escape the scandal untarnished -- just as Tony Blair's last years as prime minister were dogged by Britain's unpopular involvement in the Iraq war and questions over what media called a "dodgy dossier" that helped make the case for invasion.
Blair won an election after the Iraq war, but his popularity never recovered and his damaged reputation eventually contributed to his removal in an internal party coup. His Labour party is now in opposition.
But political experts expect the electoral fallout to be limited for Cameron, primarily because, as with a scandal over parliamentary expense claims two years ago, both of the leading parties are heavily exposed to the scandal.
"It's not necessarily something we would expect to have a huge impact on voting intentions -- particularly because at the end of the day it involves both main parties," said Helen Cleary, head of political research for pollster Ipsos Mori.
"Labour is still ahead (in the polls) but the main issue is still the economy."
The political establishment has long been in thrall to media barons, particularly Murdoch and his News International stable of British newspapers.
"There has been a succession of prime ministers who have done their level best to ingratiate themselves to News International, a process that began with Tony Blair 15 or so years ago. Clearly that has been a corrupting influence in British politics," said Conservative lawmaker Mark Field.
In fact, Murdoch's influence first began to grow much earlier, when he supported Margaret Thatcher and then helped swing the 1992 election for her Conservative successor as prime minister, John Major.
The scandal may change those relationships. Senior politicians and policymakers may begin to rethink their habit of hiring former top journalists as press advisers, which created a revolving door between the media and government that critics say encourages corruption in both directions.
The police face awkward questions over an apparent failure to investigate the hacking allegations, stories of cash changing hands for information and tales of lavish entertainment for senior officers by media executives.
In addition to this, former Metropolitan police chief Paul Stephenson quit on Sunday after criticism for hiring a News of the World executive who has now been arrested as his personal press adviser.
Labour leader Ed Miliband's chief spin doctor, meanwhile, is Tom Baldwin, a former journalist at News International.
CAMERON ON THE DEFENSIVE
Cameron has defended hiring Coulson who, like former News International Chief Executive Brooks, was arrested over the scandal.
Any failure to make changes in the relationship between politicians and media organisations could increase popular disenchantment with mainstream politics.
"I think what politicians have now got to accept is that the very cosy incestuous relationship which existed, which saw politicians and editors wining and dining each other, must now come to an end," said Liberal Democrat parliamentarian Tom Brake, whose party is part of the coalition government.
Tina Fordham, chief political analyst at Citi, said it seemed likely that anti-establishment sentiment-- already growing since the global financial crisis -- would be exacerbated by the scandal.
"It could increase the sense of alienation of the public towards elites as well as institutions. This can translate into increased voter apathy and political polarisation, making finding compromises more difficult, something problematic in the current environment of austerity," she said.
But in the end the economy, fights over the euro zone bailout and raising the U.S. debt limit to avoid default could render the story a little more than a sideshow, according to Wolfango Piccoli, Europe director at political risk consultancy Eurasia Group.
"Bottom line: in terms of the bigger picture, there is still much more to worry about in the Eurozone," Piccoli said. "In the UK, a lot depends on what more comes out but at the end of the day the stability of the coalition government doesn't seem to be threatened and its unlikely Cameron will have to stand down."
(Additional reporting by Tim Castle, Editing by Timothy Heritage)
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