And is this because of the coalition’s budget, and is Europe in danger of becoming the world’s economic laggard?

The answer to the first two questions is an unequivocal yes and the answer to the third is, unfortunately, increasing likely to be yes. The IMF forecasts that the UK economy will grow by a mere 1.2 per cent this year and by 2.1 per cent in 2011, the latter figure well below the 2.5 per cent figure announced by Alistair Darling in April and also the 2.3 per cent announced by the OBR. Given that, successive growth forecasts have revised down growth for 2011 since the budget, and with the private sector showing no signs of significant growth creation, even the 2.1 per cent projection looks highly optimistic to me.

The LibCons are banking on the private sector to deliver growth over the coming years. There is no doubt that they are planning to cut hundreds of thousands of public sector jobs during each year of this Parliament. But there is no sign of private demand picking up in the UK in 2011, especially since child benefit, housing benefit and the VAT rise will all take money out of people’s pockets. Secondly, the problems in the Eurozone means that Europe, where most of our exports go, will not be in a position to take our goods.

This is because the coalition is not the only European government to have behaved irresponsibly in risking future recovery. The IMF statistics demonstrate the short-sighted fiscal attitudes being taken by many European government, and the fundamentally different approaches to economic policy by the US and Europe.

The IMF’s economic projections for Germany, France, Italy and Spain, all of whom have made swingeing budget cuts, have also been revised down. Conversely, the US, which like Britain has a budget deficit of around 11 per cent, but is not withdrawing its stimulus measures until it sees sustained economic growth has seen had its growth forecasts revised up to 3.3 per cent for 2010 – growth that will reduce the US deficit by much more than the UK coalition’s cuts. Is this merely a coincidence? I don’t think so.

But since the US recovery is still weak, the Obama administration has been clear that it is not in a position to help Europe’s recovery by buying our exports. So, European countries will not be able to rely on the US to buy their goods.

Indeed, it is significant that the IMF survey specifically warns against the path being taken by Britain, France and Germany stating that, “advanced economies do need to (fiscally) tighten before 2011, because tightening sooner could undermine the fledgling recovery”. In other words, maintain stimulus measures for the immediate future don’t ‘slash and burn’. Remember, this is the IMF, not exactly an institution known for being rabidly left-wing!

Yet, many European countries are taking the approach that austerity is the answer – that public spending cuts and higher taxes will lead to less consumer spending and a smaller public sector, while exports will be the main drivers of growth. This is all well and good, but it can only work if this approach is co-ordinated. By simultaneously rushing to pass austerity budgets and restrict consumption, Europe’s leaders are killing stone dead the demand for exports from fellow European countries.

I won’t deny that it’s a fine balancing act – when to spend to make up for weak private demand, and when to consolidate – but Europe is in grave danger of becoming to this decade what Japan was to the 1990s. During the 1970s and 1980s, Japan was widely regarded as the new economic powerhouse that would overtake the US. Yet, recession followed by too little stimulus withdrawn too early led to over a decade of anaemic growth and, even now, a debt to GDP ratio of nearly 200 per cent – nearly treble that of Britain.

Of course, Britain needs to balance its books- but maintaining Labour’s stimulus measures that had already led to lower unemployment than forecasted, shows that there is a better, more effective alternative to unnecessary austerity. The coalition’s mad dash to slashing public spending by, potentially, up to 40 per cent and raising taxes that will stifle demand and disproportionately hurt the poorest, will, as Japan’s plight has demonstrated, not reduce Britain’s debt levels. Instead, by taking policy measures that will inevitably lead to a large rise in unemployment, the social unrest that would create and declining tax receipts, this fetishisation of austerity will cripple us for a generation. We ignore Japan’s mistakes at our peril.