“It has become clear that it is too difficult to progress in this climate,” News Corp. COO Chase Carey said in a statement, referring to the ever-widening PhoneGate scandal that has already forced the company to shut down its News of the World tabloid.

The paper’s closure was a huge news event in Britain, but the BSkyB deal, which would have seen News Corp. buy the 61 percent of the company it didn’t already own, would have been much more meaningful for Rupert Murdoch’s company.

It’s unlikely that this is the last shoe to drop at News Corp. (which also owns this Web site). Murdoch, his son James and News Corp. executive Rebekah Brooks are all scheduled to appear in front of the British Parliament next week to answer questions about the scandal.

Meanwhile, News Corp. has discussed selling off or spinning out its News International unit, which runs its remaining British papers.

And preliminary reports indicate that a scheduled debate about the News Corp. BSkyB deal will still take place today in the House of Commons.

Yesterday News Corp. announced a $5 billion stock buyback program, designed to allay investor fears. But it didn’t do much good, as shares drooped from $16.25 to $15.48. For now, it seems, investors are happier that News Corp. has moved on from BSkyB, and are pushing shares back a few cents toward the $16 mark.

The moves, which could postpone approval of a deal for six months or more, exposes the takeover of British Sky Broadcasting Group PLC to new and unpredictable risks at a time when U.K. political support has largely deserted it. Both News Corp. BSkyB shares were sharply lower Monday.

The company appeared to have few other options as the deal became a lightning rod for public outcry over reporting tactics at News Corp.’s U.K. newspaper unit. Those include recent allegations that News Corp. journalists accessed the mobile-phone voice mails of politicians, celebrities and even crime victims.

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If that’s the only fallout, Rupert Murdoch will have dodged a bullet. [Update: It isn’t the only fallout. News Corp. just announced it is shutting down News of the World.)

Earlier this month the transaction, which would see News Corp. acquire the 61 percent of the British satellite TV company it doesn’t already own, looked like a done deal.

Now, as a string of new allegations in the three-year-old voice mail hacking affair at the company’s News of the World tabloid have surfaced, the BSkyB deal is going to take much longer to close. And there’s some speculation that the whole thing may be in jeopardy. (News Corp. also owns this Web site).

The Financial Times (registration required) says the deal won’t be approved until September at the earliest, citing an influx of public comments on the proposal. The British government, in response, says there isn’t an official timetable, but that’s more of a “definition of the word ‘is’” response than a denial.

In any case, hackergate is definitely going to cause more problems for Murdoch than the run-of-the-mill scandals that News Corp. is used to dealing with.

The New York Times has a concise synopsis of the new problems at the tabloid: Allegations “that its executives had paid police officers, lied to Parliament, hired investigators to intercept voice mail messages left on the cellphones of murdered children and terrorism victims, and, in one instance, tampered with a murder investigation in which the suspects were linked to The News of the World.”

So far most of the pressure from the scandal has been directed at Rebekah Brooks, who runs the News International group that oversees News of the World. Murdoch, in a statement, has backed Brooks. But it won’t be surprising to see her go, regardless. The big question is whether the scandal bubbles up to engulf Murdoch or his son James, his likely successor.

Yesterday investors weighed in and drove down News Corp. stock as much as 5 percent; this morning it’s ticking back up.

Talking about a range of Web issues, the interviewees include pundit and investor Esther Dyson, Real Networks’ Rob Glaser, Simon Assaad of Heavy, BSkyB’s James Murdoch and the ubiquitous Quincy Smith of CBS: