LEADER: The Windsors cannot win

Last night's Panorama interview with the Princess of Wales was an extraordinary event. It made compelling television. There was the sense of history as she told her side of the story. There was the window on a world which remains profoundly aloof, secretive and privileged. Above all, there was the feeling that we were witnessing a struggle for credibility and legitimacy. This is a strange thing to say about an institution whose authority is dynastic and preordained. And yet that is precisely what the bitter feud between Charles and Diana is all about.

It had small beginnings. Clearly Charles resented his wife's popularity with the public and for that reason, it would appear, elected to undertake their public duties separately rather than together. Charles' decision - fateful and catastrophic - to broadcast an interview with Jonathan Dimbleby ushered in what can only be described as hand-to-hand fighting in public, courtesy of the television screen.

Who will win? The obvious answer is Charles and the Royal Family. They are the most powerful family in the land, they run a formidable machine. But the obvious answer is wrong. In a battle fought out in the media, such power and privilege counts for little if they cannot deliver public support. Charles remains other-worldly. His ability to identify with the public, and vice-versa, is strictly limited. He is what he is: a man brought up in conditions of extreme privilege in a family where love and emotion were in short supply. In the face of this, Diana is an impressive performer. She is a modern young woman who speaks a language that millions of people, particularly women, can empathise with. When she described her post-natal depression and her bulimia, it must have touched many people. When she described life with Charles and how the Royal Family has tried to isolate and exclude her, it rang true. Of course, when she spoke with mannered innocence of her relationship with the media and publicity, it rang a little hollow; likewise the passage at the end on serving the people. Yet even here she was saying something of significance. Diana has become a public leader, a position she married into and then won. In contrast, Charles is there by virtue of birth alone.

This is an unequal contest: a modern young woman versus a middle-aged man who enjoys precious little contact with, or understanding of, the modern world.

How will the Royal Family respond to Diana? There are signs that they will take the path of revenge. But it would be a fatal error. The Royal Family has far more to lose than Diana: she has her reputation, for the Royal Family it is Charles's succession, probably more. Media wars are essentially unpredictable, dangerous and fickle. They are creatures of the information society, not aristocratic hierarchy. And, dangerously for the Royal Family, the British like the underdog who, in this situation, is most certainly Princess Di.

The Royal Family brought this state of affairs upon itself when it abandoned cocooned privilege for soap opera and showbiz. If the Palace exercises due self-restraint, it will minimise the damage. If the Palace opts for revenge, it is likely to hasten a constitutional crisis involving Charles's succession and the constitutional functions of the monarch. This may happen anyway. The process of reform is under way with the Queen's decision to pay income tax and the removal of the minor royals from the Civil List. That is just the beginning. We do need a different kind of monarchy: smaller, more open, more accountable, less privileged, with a reformed constitutional role. Diana herself hinted at some of this. How we get there, though, matters. Sleaze, dirt, grudge and continued bickering will do neither family nor nation any good.