By Peter Griffiths
LONDON (Reuters) - Britain's Labour Party leader suffered a setback in his fight to replace David Cameron as prime minister on Thursday when his election coordinator quit after a row over whether unions manipulated its selection of candidates.
Less than two years before voters go to the polls, Tom Watson stepped down, saying in a letter to Ed Miliband that it was "better for you and the future unity of the party that I go now".
His departure is a blow for Miliband, who narrowly beat his older brother David in a Labour leadership contest in 2010 with the crucial support of the trade unions, one of the party's biggest sources of funding.
Since then, Labour have led Cameron's Conservatives in the polls at a time of economic slump, but Miliband's personal ratings have been weaker than the prime minister's or those of Tony Blair, who won three elections for Labour.
Watson's departure follows days of bad headlines for Labour over claims that Unite, Britain's biggest union, tried to hijack the process to choose a Labour candidate to contest a parliamentary seat in the Scottish town of Falkirk at the 2015 election. The union's preferred candidate was Watson's office manager. Unite said it operated within Labour's rules.
Cameron seized on the episode as evidence of Miliband's weakness at the hands of powerful unions trying to push Labour back to the left after a shift to the center under Blair.
In his resignation letter, Watson said he hoped Labour would publish its internal report into the Falkirk affair to allay "spurious suppositions" in the public domain.
"I am proud of your Buddha-like qualities of patience, deep thought, compassion and resolve," Watson wrote to Miliband. "I just don't think you need me in the Shadow Cabinet."
Miliband said Watson's resignation made "sense for you and for the party".
Watson, 46, has been a member of parliament since 2001. He is known for his fierce criticism of Rupert Murdoch and his campaigning during the phone-hacking scandal which embroiled the media mogul's British newspaper business.
(Editing by Mark Heinrich)