Actually nothing stops the government from signing the deal. A govt. that is holding legitimate office is allowed to sign bilateral deals without parliament's approval. In this case, the commies have threatened they will withdraw support if UPA signs the deal. Congress by itself was OK with facing early elections but some of the constituents are worried they will lose in an early election scenario. So, they are against signing the deal as the consequences could hurt them. As we get closer to the election dates, one could see the deal getting signed. and hopefully MMS/SG will call the bluff off and actually sign it.
