By Emmeline Saunders
David Miliband has accepted the European foreign policy minister role he was tipped for, a Labour source has told politics.co.uk.
The foreign secretary could announce his new position within the next fortnight, triggering a by-election in his South Shields constituency seat which might be contested by Peter Mandelson.
The business secretary could even take over leadership of the party after what is widely anticipated to be a dire election result for Gordon Brown and Labour.
There is speculation within the Labour party that Lord Mandelson could become a caretaker leader after the general election - assuming Labour lose - for a single term, before handing power over to Mr Miliband, the source claimed.
Now the Lisbon treaty has been ratified by the Czech government, EU officials want the new 'foreign minister' post of high representative and that of the presidency of the European council filled in the next month, to be operational by January 1st.
Mr Miliband has distanced himself from the EU's first high representative for foreign policy role, but has not ruled himself out of the running. He could only be a realistic contender if former prime minister Tony Blair's candidacy for the presidency fails.
A Foreign Office spokeswoman said today she had not heard that Mr Miliband had accepted the job. Officials had previously denied his interest in the post.
Sources close to Mr Miliband strenuously denied the reports this morning.
The prime minister and foreign secretary were involved in a terse exchange at a Brussels press conference last week when they were asked about the shortlist of candidates. Mr Brown quickly dismissed rumours that Mr Miliband had been proposed for the job.
"Let me just say, I have been at the meeting," Mr Brown said.
"That was not their decision, just let me tell you. Also if there is a shortlist I am sure David would be on it because he has excellent qualifications. But he doesn't want to be on it. And indeed there is no such list."
Mr Miliband laughed off the suggestion, replying he was "not available".
Speculation about his candidacy had been fuelled by a series of speeches he had given on how to campaign for a "global Europe", which had been viewed as attempts at canvassing for the post.
Lord Mandelson is currently barred from running as an MP as he is a lifetime peer.
But on Sunday the Independent reported he had recently appeared in South Shields to deliver the town's annual lecture.
For him to stand for the constituency - and have any realistic hope of becoming prime minister - Lord Mandelson faces a significant legislative hurdle.
The constitutional reform bill allowing life peers to resign from the House of Lords is currently at committee stage in the Commons, leaving weeks of procedure remaining.
The writ for a by-election would have to be moved within three months of Mr Miliband stepping down. His term in Europe would begin on January 1st.
But, if timed correctly, there may not be a need for a by-election at all. Seats are often left vacant towards the end of a parliament, to be filled at the general election.